It is a common misconception that estate planning is important for only those with money or who are advanced in age. This myth is a cruel deception. In most states, if you own property over $30,000 your children or family could be subject to probate. By investing the time now to plan your estate you could possibly save your loved ones months if not years of agony and literally thousands of dollars in court fees and/or estate taxes.
What is Estate
Planning?
Arranging for the distribution
of one's wealth is what estate
planning is all about. A critical
part of estate planning is
creating documents that outline
your wishes for distributing
your assets after you die.
Every individual has an estate
plan. If you do not have a
formal written will or trust,
your estate plan is created
out of default by your state.
Every state in America has
laws governing the distribution
of property when a person dies
without a will or trust. If
you have not made any provisions
for the distribution of your
estate before you die, your
estate would be distributed
according to your state's
"intestate succession" statutes
which provide for the distribution
of your estate to your spouse
and relatives in an order established
by your state's law. So the
question is not whether you
will have an estate plan, but
whether you will have an estate
plan of your own selection
or one imposed upon you by
law.
Unfortunately, many people
have neither a will or a trust
which would identify their
intent and desires after their
death. They become so involved
in their daily activities that
they give little thought to
the consequences of their demise.
However, many do realize the
importance of estate planning
documents to protect and provide
for their dependents, but people
often die prematurely leaving
dependents unprotected. Families
can be financially devastated
and ripped apart by this procrastination.
So, as discussed your choices
for estate planning are as
follows:
- Doing nothing
- Preparing a Will or a Trust
Traditionally, estate planning
has involved creating a will.
A will is a legally binding
document that addresses how
your assets will be distributed
at your death and also names
an executor who will assist
with the administration of
your estate. Settlement of
your estate may be supervised
by the probate court. This
process depending on the nature
of your estate can last as
quick as 6 months for a simple
estate or up to 1-2 years for
more complex estates.
A will is a flexible tool
that can be changed at any
time as long as you are mentally
competent. In addition to naming
distribution of the estate,
your will can:
- Designate a trust to be
established for family members
after assets go through probate.
(This type of trust is known
as a testamentary trust not
to be confused with a Living
Trust.)
- Nominate a guardian.
- Direct how debts, taxes
and expenses are to be paid.
Some of the advantages
of a will are:
Disputes can be settled through
the probate court.
A will is traditionally cheaper
to prepare than a trust ($200
to $2,000).
The probate process can lessen
the time allowed creditors
to make claims against your
estate.
Probate estates can select
a fiscal year rather than
a calender year for income
tax purposes.
Some the disadvantages of
a will are:
Lack of privacy: Your files
can be accessed through the
records office.
Time: Probate can take 6
months to 2 years or more
until distribution is administered.
If you own property in more
than one state, then probate
needs to be held in each
state.
Probate and legal
fees can range anywhere from
3% to 10% of your gross estate.
If you should become incapacitated,
a will does not make any
provisions. You need a separate
Durable Power of Attorney.
By preparing a will, most
people feel they have effectively
safeguarded their family's
inheritance. However, this
is often a false "peace of
mind".
A Last Will and Testament
outlines your wishes about
the distribution of your
property after death, but
testamentary documents such
as wills usually require
probate. In preparing only
a will, you may be forcing
your loved ones through months,
even years, of agony in the
probate court. In some states,
probate can take 10% of your
GROSS estate.
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