Why You Need an Estate Plan Right Now
Spending lots of time thinking about your own death can feel a little morbid, but none of us know when a tragedy could strike. Having a plan in place helps ensure that our loved ones are cared for and that our assets are protected if the unexpected occurs.
But I already have a will, you’re saying. Do I really need a whole estate plan?
A will is a crucial element of an estate plan. It’s a great first start, but on its own, it’s a limited document. A will instructs a court about where you’d like your assets to be distributed, but someone still has to probate the will (prove it in court), which can be a lengthy, expensive and exhausting process
Plus, most wills do not effectively manage the assets for those that need limits on spending. Most wills provide for an outright transfer of assets, giving heirs 100% control — a situation that can be problematic, especially for young heirs.
A will also doesn’t necessarily cover all possible situations — like if you were to become incapacitated and need a medical representative. A full estate plan can create a structure that protects your assets and your wellbeing.
We’ve put together five reasons that you need an estate plan right now.
You want to avoid probate
Probate can be a costly, time-consuming, and a public process. The typical probate could run anywhere from eight to eighteen months, but if there are challenges to the estate, that number can jump into the years.
Probate court fees vary by county. Most are relatively inexpensive, but the process of administering the estate, potentially hiring an attorney if that becomes necessary, and dealing with any possible challenges can increase the costs substantially.
Most importantly for some, the probate process is public. That means any documents that are submitted to the probate court — including those about your debts and assets — become part of the public record.
For many families, maintaining privacy is a major concern.
A proper estate plan can structure assets in such a way that they automatically transfer to heirs or are held in trust. These strategies make the assets non-probate assets — ones that don’t have to go through probate.
You want to protect your beneficiaries
Many people think of a will as the best way to protect your beneficiaries, but like with estate planning as a whole, a will only does part of the job. First, it can be challenged, creating a lengthy and exhausting process for the executor.
Second, it has to go through probate. The probate process requires a certain order of distribution where estate funds must be paid first to things like taxes and funeral expenses, next to creditors, and only last to beneficiaries. Estates that are underfunded and can’t pay their beneficiaries are common , and can be avoided.
On the other hand, a proper estate plan creates a system that bypasses probate. Through the estate plan, money is held in trust or transferred directly to the beneficiary, so an intended beneficiary is not at risk of losing the assets because of the estate’s debts.
You want to reduce family discord
Everyone has heard stories of families ripped apart over will disputes or guardianship decisions. Lifetimes of hurt and anger get channeled into fights about whether Mom really meant to leave different amounts to each of the children or whether the brother is appropriately managing the bank account while Dad is incapacitated in the nursing home.
No document can protect families from the pain and confusion of a tragedy, but a thorough estate plan can remove some of the potential areas of conflict by leaving less up for discussion. With strategies like pay on death accounts, trusts, and designated beneficiaries, assets transfer automatically without court (or additional family) oversight or approval.
You want to protect your assets
Particularly for those with high-value estates, putting mechanisms in place to protect assets can be critical. A will can be challenged by anyone who could’ve been an heir.
For instance, if an individual decides to leave the bulk of their estate to their favorite charitable organization, the individual’s children could challenge the will saying that the head of the organization pressured their parent when they weren’t at full capacity and their parent never would have left their children so little in the will.
Challenging trusts is more difficult than challenging a will, in part because the money goes immediately to the beneficiary upon the triggering event — in the example above, the individual’s death.
You want to protect yourself
One of the elements of estate planning that people often overlook is its value during end-of-life events. If you become incapacitated, you want the care you receive and the decisions made about how to finance that care to be in line with your values.
You’ll need, at minimum, a health care proxy and a power of attorney so someone that you trust can carry out your wishes.
Creating an estate plan may sound tedious or stressful, but it is the most responsible way to protect yourself, your loved ones, and your assets.