Preparing You And Your Family For The Future
An estate plan is a collection of documents, prepared with the assistance of an estate attorney, that define how your assets will be managed in the event of your death or incapacitation. The end of the line is something most people dont like to spend too much time thinking about but putting off your estate planning isnt wise. Lack of preparation will only make things more difficult for the friends and family members who will have to deal with your assets and debts when youre gone.
Whats in an Estate Plan?
An estate plan has a lot of moving pieces, which is why the documents it contains need to be periodically reviewed and updated.
The centerpiece is your Will, a specific set of instructions that names the beneficiaries who will inherit your assets, the guardians for your dependent children, and the person who will be managing your estate (the executor).
You may also want to create a Living Will which manages both your assets and personal care if you become incapacitated. Alternatively, you can create a power of attorney for a spouse or trusted associate who will then be legally permitted to make important financial and/or medical decisions on your behalf.
As trusts are not subject to probate, many people create one or more as part of their estate plan. Assets are owned by the trust, which means once it is created you no longer have control of the money or property it holds. A living trust, however, can allow you to receive regular stipends as a named beneficiary. Creating an irrevocable trust is also a way to protect assets from creditors and ensure that a portion of your estate still goes to your beneficiaries if you have a significant outstanding debt.
Finally, your estate plan can also include things like funeral arrangements, ongoing care for your pets, and charitable donations. As a whole, it should contain everything necessary to make the distribution of your assets and care of dependents as seamless as possible while protecting your wealth from probate and taxation.
Why Do I Need One?
Ben Franklin is credited with having said the only two certainties in life are death and taxes, and one of the prime reasons for creating an estate plan is to reduce the amount the IRS will claim when you die. This is rarely an issue for small estates, and wont be levied on assets left to a spouse, but is a major concern if your estate exceeds the legal exclusion limit.
Careful estate planning can also decrease the likelihood that your estate will be subject to probate. This is a court-supervised process that verifies the authenticity and validity of your will and can delay the distribution of assets to your beneficiaries. If you die without a Will, the probate process will be long and expensive, reducing the amount left over for inheritances. The creation of a trust is a principal way to distribute assets without the threat of probate.
Perhaps the most important reason to create an estate plan is to ensure that your assets are distributed as you would want them to be. Without a Will, the state will determine the distribution of your assets in accordance with its inheritance laws. Unfortunately, these rarely accord with individual circumstances and may leave some of your dependents with no means of support.
Its never too early to create an estate plan. A comprehensive estate plan is essential if you want to have some measure of control over what happens to your assets when you die or become incapacitated and is an important financial planning tool. Talk to an estate attorney about how to make sure your wishes are protected and your family isnt left to cope with uncertainty in their time of loss.
The attorneys at Khinda Wilson LLP have the international experience and expertise and can assist you with all of your estate planning solutions. Contact us for a consultation.