Planning for the unexpected is one of the most important steps you can take to protect your loved ones and your assets. Procrastination can be costly for you and your loved ones. If you die or become disabled without a plan, who will manage your care, control your assets, or take care of your loved ones? Prior planning will allow you to choose those who make decisions and control your assets on your behalf and minimize estate taxes.
Planning for Disability
If you are unable to manage your own affairs, whether temporarily or for an extended period, having a plan in place allows your spouse, adult children, or a trusted friend/advisor to manage your affairs. If you become incapacitated without a plan, your loved ones may be forced to seek a conservatorship to authorize them to manage property or a guardianship to manage your health, safety, or care. Both are lengthy and expensive processes. By signing durable powers of attorney and health care proxies, you choose those who will make decisions for you when you are unable to do so. Often overlooked is the importance of having these documents in place for adult children when they go off to college or embark on their careers. They too need someone to manage their care and affairs in the event of an accident or illness. If you have recently relocated, your documents may need revision to meet the statutes in the state where you are now residing, as the laws relating to powers of attorneys, health care proxies and living wills vary from state to state.
If you leave your estate to your loved ones using a will, much of what you own will pass through probate, an expensive and time-consuming process open to the public. The probate court controls the process until the estate has been settled and distributed. If you are married and have children, you want your surviving family to have immediate access to cash to pay living expenses while your estate is being settled. It is not unusual for the court to take a long time to authorize your personal representative to act on your behalf. Passing assets to your loved ones outside of probate, in a prompt, efficient and private manner is easy to achieve with prior planning.
Providing for Minor Children
It is important that your estate plan address issues regarding the care of your children. If your children are young, you may want to consider implementing a plan that will allow your surviving spouse to devote more attention to your children, without the burden of work obligations. You may also want to provide for special counseling and resources for your spouse if you believe they lack the experience or ability to handle financial and legal matters. You should also discuss with your attorney the possibility of both you and your spouse dying simultaneously, or within a short period of each other. You will want to nominate a guardian to care for your children and have a contingency plan naming a trusted person to manage your assets. The person or a trustee who attends to the finances need not be the guardian. In fact, in many situations, you may want to intentionally designate different persons in order to maintain a system of checks and balances. Without a plan, the decisions as to who will manage your finances and raise your children may be left to a court. Even if you are lucky enough to have the person or persons you would have wanted selected by the court, they may have undue burdens and restrictions placed on them by the court, such as having to provide annual accountings.
Minimizing Estate Taxes
The size of your estate will determine whether your estate will owe federal or state estate taxes. There are many ways to reduce those taxes, but prior planning is essential in order to minimize them.
Charitable Bequests – Planned Giving
Your estate plan can make provision for your favorite charitable organizations or causes in a variety of ways, either during your lifetime or at your death. Depending on how your planned giving is set up, it may also let you receive a stream of income for life, earn higher investment yields, or reduce your capital gains or estate taxes.
A well-crafted estate plan should provide for your loved ones in an effective and efficient manner by avoiding guardianship during your lifetime, minimizing assets subject to probate at death, reducing estate taxes and avoiding unnecessary delay.
You should consult a qualified estate-planning attorney to review your family and financial situation, your goals, and explain the s options available to you. Having your estate plan in place and knowing that you have provided for yourself and your family in case the worst happens will give you peace of mind. Proper estate planning not only puts you in charge of your finances, it can also spare your loved ones of the expense, delay and frustration associated with managing your affairs when you pass away or become disabled.