1. To Select And Empower Trusted Individual(s) To Handle Your Affairs If You Become Incapacitated.
Estate planning deals in part with providing for your own care and protection in the event that you suffer a long-term illness or injury at some point during your life, and are unable to handle your own affairs. If you become incapacitated, your family will have a hard enough time without having to go through an expensive and hassle filled guardianship or conservatorship proceeding and dealing with the expensive and ongoing probate court oversight. With proper planning, however, your selected individual(s) can assist with your health care and financial concerns without any of the costs or hassles or court oversight of a guardianship or conservatorship, under a Power of Attorney (for asset related and financial purposes) and an Advance Directive for Health Care (for health care concerns). Everyone needs to do this type of planning, for their own protection. If you aren’t sure whether you have anyone you would trust with this power, we can help you consider your available options.
2. To Provide For Your Desired Beneficiaries.
Estate planning also provides for the distribution of your assets after your death. This aspect of estate planning is done for the benefit of those you will leave behind, rather than primarily for your own benefit.
Some of the questions to consider include: Who is to benefit from your property after your death? Is your property to be distributed outright to your intended beneficiaries or is your property to be transferred to one or more trusts for the benefit of your intended beneficiaries? Should the property benefit your intended beneficiaries but at the same time be protected from your beneficiaries’ problems, such as creditor problems, divorces or other marital problems, and estate taxes at their deaths? Do you want to limit a beneficiary’s access to your property or control the timing of a beneficiary’s ability to access the property? Do you want to benefit an older parent or disabled child or grandchild without affecting that person’s ability to qualify for needs-based governmental benefits such as Medicaid? Do you want to make access to your property subject to incentive and/or disincentive provisions, such as educational and work related incentives and drug related disincentives? Your property belongs to you and, with proper planning, you can control it as you desire.
3. To Select Fiduciaries Who Will Carry Out Your Wishes After Your Death.
You have the power to choose the fiduciaries who will carry out your estate distribution plans – your Executor and, sometimes, your Trustee. Questions to consider in making fiduciary selections include: Should you choose an individual, such as your spouse, another family member, a friend, or a trusted professional? Should you choose a corporate fiduciary, such as a bank, brokerage, or trust company, to serve alone or with a selected individual?
You can give your fiduciaries the maximum available level of power and flexibility, allowing them to carry out your wishes as set forth in your estate planning documents with minimal outside supervision, or you can limit the control the fiduciary is given and specify that the fiduciary be subject to supervision by a court, the beneficiaries, or a third party “trust protector.” You can give beneficiaries h4 rights which allow them to demand a certain level of distributions, or you can give the beneficiaries almost no right to demand benefits at all. You can even put an appropriate trust beneficiary in as his or her own Trustee, allowing the beneficiary to have control, access, and protection. Proper estate planning allows you to decide these issues.
4. To Select The Guardian For Your Minor Children.
Proper estate planning allows you to select the person or persons who will raise your minor children if both you and your spouse die prematurely. If you fail to do proper estate planning, however, then the probate court will determine who raises your children, and will make this decision without the benefit of your knowledge and opinions. In the worst case scenario, your minor children could even end up living in foster homes if you have not provided for the appointment of a specific guardian through a properly prepared Will.
5. To Minimize Or Avoid Conflict And Confusion At Your Death.
Without proper planning, chaos will oftentimes reign following one’s death (especially when one’s death was unexpected due to one’s young age or great health). Chaos can create or aggravate tension among your heirs, which can increase the chance of family dysfunction, disharmony and disputes. Chaos can also increases the expense of estate administration, and can jeopardize the survival of a family business or even reduce your loved ones’ ability to retain and benefit from illiquid assets such as a main residence or vacation home.
6. To Minimize Or Avoid Wealth Transfer Taxes.
More than any other kind of taxes, the wealth transfer taxes (which include the gift, estate and generation skipping transfer or “GST” taxes) can be viewed as penalties imposed for poor planning and ignorance of the law. In most cases, wealth transfer taxes can be significantly reduced or even eliminated with proper estate planning.
7. To Ensure That Sufficient Liquidity Exists To Meet Cash Needs At Death.
A lack of cash at your death can cause serious problems. Without sufficient liquid assets, your family may not be able to continue living the same lifestyle, children in private schools or college may have to quit school, transfer, or find jobs, and the future of your loved ones can be dramatically affected in other ways. In addition, your illiquid assets may have to be sold to raise cash, which can result in a loss of value when the need to sell quickly causes assets to be sold at “fire sale” prices. One fact to keep in mind when doing estate planning is that estate taxes due at your death will normally be determined based on the date of death fair market value of your assets (the “fair market value” of an asset is the price which a theoretical willing buyer and willing seller, with neither being under a compulsion to buy or sell, would agree upon), and not on any actual “fire sale” sales price which may be received. Most estate planning attorneys are familiar with real life horror stories in which valuable assets actually turned into significant liabilities at someone’s death because the assets had to be sold quickly after death to raise cash to pay estate taxes and administration expenses, and the “fire sale” prices obtained in the sales failed to produce enough cash to cover the estate tax liability calculated on the assets’ date of death fair market values. Estate taxes, if due, must be paid within 9 months of the date of death, in cash. If your assets are highly illiquid, a competent estate planning attorney should be able to point this out to you, and recommend strategies which can help ensure that sufficient cash will be available at the date of your death.
The Importance Of Good Estate Planning.
Done properly, estate planning takes time and energy, and may be costly. However, when compared to the savings in taxes and expenses which can be obtained, and the significant problems which can be avoided, with proper planning, the professional fees for good estate planning services are usually insignificant. After a lifetime accumulating an estate and protecting your family, it would be a serious waste for you to not spend an appropriate amount of time and effort to ensure that your assets pass to, and for the benefit of, your desired beneficiaries, at the right time, under the care of the your desired fiduciaries, with the least amount of confusion, tension, and difficulties, and with the least amount of estate tax and administration expenses.