There is a common misconception that estate planning is only for the wealthy so they can minimize their tax liabilities. While this is one part of estate planning, it is certainly not the only part. Even if someone isn’t wealthy or concerned about taxes, there are a number of important non-tax reasons why everyone should have an estate plan:
1. Incapacity. This could be the most important reason to create an estate plan – for you! With an estate plan, you can ensure that the right people are making critical decisions for you if you are unable. By creating a Health Care Power of Attorney, you can designate someone who will make health care decisions for you if you are unable. It is also important to create a Living Will specifying your end of life wishes in the event you are unable to do so yourself. In addition, a Durable Power of Attorney provides incapacity planning with regards to your assets and property. A properly funded Revocable Living Trust would also accomplish this purpose.
2. Distributing Assets. People often think of this part of planning first. By creating an estate plan, you – not your state of residence – decides who inherits your assets and how. Without an estate plan, a person’s assets are distributed pursuant to the laws of intestate succession. These laws are especially unkind to blended and non-traditional families. And, if you want to leave any part of your estate to a charity or non-family member it simply cannot happen without creating an estate plan that includes a Last Will and Testament or Revocable Living Trust. Another important part of distributing assets is how they are distributed. By creating a Revocable Living Trust, you can state your preferences on how assets are distributed, especially to minor beneficiaries. This could include providing for education, purchase of a first home, etc. while also distributing the bulk of the assets in stages as the beneficiary matures.
3. Avoiding Conflict. We all know that when there is money involved, conflict often follows. This may not be the case for every family, but is distressingly common. A well drafted estate plan can be a big help in preventing family strife. This is especially true when assets are being distributed in a non-traditional way.
4. Guardians. For parents with young children, this is the single most important reason to create an estate plan and specifically, make a Will. In Arizona, a Last Will and Testament is the only place a parent can nominate a guardian for their minor children if something happens to them. Without creating a Will and naming a guardian, the result is a court appointed guardian.
5. Fiduciaries. Part of creating an estate plan is naming fiduciaries and agents to act in your stead. This includes agents named in your Powers of Attorney, a personal representative (executor) named in your Will who administers probate, and a successor trustee who manages trust assets if the trustmaker becomes incapacitated or passes.
6. Probate. Probate can be a long and cumbersome process. It can become longer, much more difficult and significantly more expensive if the deceased did not create an estate plan. When people disagree during probate, the probate action can quickly turn into full on litigation with lawyers, motions, hearing, and even trial.
7. Coordination. A good estate planning attorney should discuss all of your assets. Some of your assets may already have beneficiaries, like life insurance policies or retirement accounts. These types of assets do NOT pass pursuant to an estate plan. Instead, they pass to the person(s) designated as beneficiary on the account. Depending on how you want your assets divided and distributed, an estate planning lawyer will be able to help you coordinate everything to ensure that all of your assets are accounted for and distributed the way you want.
To discuss how an estate plan can work for you, call Scottsdale estate planning lawyer Abigail Neal at 480-699-7992 today.