What To Know About Estate Planning: It’s Not Just for the Wealthy
Professional estate planning is a clear necessity for those with millions of dollars in assets. It reduces the tax burden on their estate, minimizes conflict and confusion among heirs, and helps ensure that the estate is distributed according to their wishes.
But what about the rest of us? Most people don’t have estates worth millions, so they naturally have doubts that they need to worry too much about what happens to their property after they die. However, it’s important to understand that estate planning is not just for the wealthy; it can provide the same benefits for people with more modestly sized estates and is generally worth the investment.
The best way to understand how estate planning can work for you is to run a “fire drill.” This means playing out what would happen if you were to die right now. While it may seem a bit morbid, it helps people understand that they do have assets (often more than they realized) and that if they don’t make decisions about what happens to those assets after they die, then someone else will.
A proper estate planning fire drill requires the assistance of a professional, as most people are not familiar enough with things like probate and estate taxes to simulate the legal consequences. However, we can still run through a few common considerations.
If you have children under the age of 18, it’s important to consider what will happen to them if both parents die. Unfortunately, this can happen, and when it does happen, it is usually unexpected. In that case, someone must be appointed as the child’s legal guardian until they reach adulthood. If you don’t make that decision yourself, a court will have to make it for you. Given the obvious importance of this issue, it’s best that you make your wishes clear and discuss them with the person or persons you want to take on that responsibility.
It’s also good to create a trust that will care for your estate until your children are old enough to do so themselves. This helps ensure that the children are cared for and gives you some control over the terms of the trust. For example, you can decide who will be the trustee and what age the children should reach before taking full control of the property.
Spouses & Partners
If a married person dies without a will, their property generally goes to the surviving spouse through the laws of intestacy. While this usually makes sense, there are a few issues to keep in mind.
First, if there is property you want to go to someone else—a child or a friend, for example—then you will need to make that clear in writing.
Second, even if all the property ultimately goes to the surviving spouse, a lack of estate planning can create unnecessary headaches. For example, a common issue is when property such as a house is only in one person’s name; the surviving spouse may get the house eventually, but the process will be more complicated and expensive.
Unmarried couples have significantly greater estate planning needs precisely because of the laws of intestacy mentioned above. Courts will usually not recognize the legal significance of these relationships, leaving the surviving partner with little recourse and potentially in conflict with other family members.
Specific Circumstances of Family Members
You may be well acquainted with the lives of the people who could inherit your estate—their economic circumstances, personal abilities, etc.—but courts are not. Without a will, the probate judge will distribute your estate according to the laws of intestacy, which do not consider those people’s specific circumstances. For example, maybe one of your children helped you build your house, and you want them to have it after you die. Unless this wish is recorded in a will, all the siblings could jointly inherit the house.
Create the Right Estate Plan
These and most other issues can usually be resolved without much effort if you take the time to sit down with an estate planning attorney. They could help you figure out what would happen to your estate if you were to die today and then improve on those results. With just a little investment, you can make things much easier for those that survive you and see that your wishes are respected.
Contact our office today to schedule a consultation and get the process started.