When a person dies without having a valid estate plan in place, his or her property passes by what is called “intestate succession” to heirs according to state law. In other words, if a person doesn’t have a will, the state will make one for him or her. However, this generic default can differ dramatically from what the person actually would have wished for their belongings and loved ones. Even when it is known by all involved what the person “would have wanted,” no exceptions are made where no valid will exists. Nor are there any exceptions made based on need, hardship, or special circumstances.
Here are some benefits of proper planning:
1. Retaining Control Over Your Estate:
If you plan your estate, you will be able to choose who receives which asset from your estate. You will also be able to select the persons who administer your estate. Choosing competent and trust-worthy executors/trustees and giving them the necessary authority will save money, reduce the burden on your survivors, and simplify administration of your estate. It also will reduce a court’s involvement and will avoid arranging and paying for a bond, which may be denied to applicants who are not credit worthy.
2. Continued Parenting:
If you do not want your children to get all of their inheritance at 18 but you want them to get a portion of it when they accomplish certain goals (like graduating from college, getting a job in their major, starting a business) you can get a trust drafted to put conditions on the timing of the receipt of their inheritance. This way you create incentives for your children to be successful in life – even in your absence.
3. Funeral Pre-planning to Ease the strain on your family:
Many people take a burden from their grieving survivors and plan their funeral arrangements when planning their estate. Or you may simply want to limit the expense of your burial or designate its place. You also can provide for your body to be cremated or given to medical science after you die.
4. Avoid Family Conflicts, Confusion, and Unfairness:
Many individuals have complicated family dynamics in which members of the same family do not get along or have resentments. Often, it is the person who passes away who is the “peacemaker” in the family or the “glue” that keeps relatives together. This situation only worsens when the peacemaker passes away – family members may fight over the possessions or feel that their loved one’s wishes are not being carried out. Estate planning is a common sense way to minimize this friction because everyone can be very clear – even ahead of time – of the wishes of the peacemaker for the fate of his/her belongings.
5. Prepare for Your Incapacity:
During estate planning, most people also plan for possible temporary or permanent mental or physical incapacity. This planning is especially important for single people, parents, and those who live an alternative lifestyle.
Living wills and durable health-care powers of attorney enable you to decide for yourself who can visit you in the hospital and who should make decisions for you about medical treatment. Otherwise, should you become incapacitated; you are left to the wisdom of the Clerk of Court and the legal system to appoint a guardian.
Additionally, disability insurance can protect you and your family if you should become disabled and unable to work.
6. Provide for Your Relatives who need help or guidance:
Do you have family members whose lives might become more difficult without you, such as an elderly parent, disabled child, niece, nephew, or a grandchild whose education you want to help fund? You could establish a trust fund for family members who need support that you won’t be there to otherwise provide.
7. Prevent an Expensive Probate:
Everyone wants to keep the cost of transferring property to beneficiaries as low as possible, which leaves more money for the beneficiaries. A full blown probate includes the costs of fiduciary fees, attorney fees, bonding fees, and court costs. These costs can add up to be a large percentage of your estate. Good estate planning can reduce these expenses significantly.
8. Transfer your property to beneficiaries quickly:
You want your beneficiaries to receive the property you’ve left them without months or years of lag time. There are several options and estate planning tools available which could avoid or greatly ease the pain of probate. Learning about and utilizing these options now means your loved ones need only later use simplified or expedited probate.
9. Benefit Your Church or other Charitable Cause Close to Your Heart:
Your estate plan can help support religious, educational, fraternal, and other charitable causes, either during your lifetime or upon your death, and at the same time take advantage of tax laws designed to encourage private philanthropy. This can not be done without estate planning.
10. Reduce taxes on your estate:
Every dollar your estate has to pay in estate or inheritance taxes is a dollar that your beneficiaries won’t get. A good estate plan can give the maximum allowed by law to your beneficiaries and the minimum to the government.
11. Make sure your business goes on smoothly:
If you have a small business, the operation might be thrown into chaos upon your death. You can provide for an orderly succession and continuation of its affairs by spelling out what will happen to your interest in the business. This is called Business Succession Planning.
12. Asset Protection:
Irrevocable Trusts allow a person to transfer certain assets in order to protect them from estate taxes and certain creditors. This way you leave a bigger estate behind.