Complete and effective estate planning for an individual can involve many different issues depending on the situation, although, when boiled down, estate planning is in general an attempt to put into place a plan to allow for the orderly handling, transition, and/or distribution of your estate assets in the event of death or incapacitating mental or physical health issues. Depending on your individual situation, estate planning can at times also involve tax planning, planning of which is intended to help you structure your estate in a manner so as to minimize your estate’s potential estate, gift or generation skipping tax liability exposure.
There are numerous reasons why individuals should complete appropriate estate planning, but some of the most common include the following:
- In the event of incapacity through an injury or serious mental or physical illness, estate planning through the means of powers of attorney, living wills, and advanced directive documents provides for the appointment of persons who can assist you and your estate during times when you’re unable to handle your legal or financial affairs yourself. Absent these types of documents in place, your loved ones may be put in the challenging position of having to petition a court to become your guardian or conservator in order to fully address handling your affairs for you.Courts do the best they can to try to appoint the best guardian or conservator for persons need one, however, the party selected may not end up being the party you would have appointed through a power of attorney document had you properly executed this type of document prior to incapacity. Guardianship and conservatorship proceedings are not only time consuming, they also have the potential to substantially deplete estate assets, especially proceedings where disputes arise between family members.
- Proper tax planning when completing your estate plan can help you minimize potentially avoidable negative tax consequences, more specifically, the minimization of estate or gift taxes. An attorney that practices in the area of estate planning can help you determine when you would likely become subject to avoidable estate and gift taxes, and they can then assist you in structuring your estate and gift planning so as to minimize unnecessary asset depletion from your estate.
- Appropriate estate planning can provide a court, through the terms and directives you state in your will, guidance as to whom should be designated as the guardian over any minor or incompetent children you may have at the time of your death.
- Estate planning can allow for, through the terms and directives stated in your will, the orderly transition of all of your assets to the beneficiaries you name in your will. Properly designating an executor in your will can also improve the chances that the party you would like to be your estate’s executor will be appointed by the court. The more clarity you are able to bring to how you would like your assets handled after your death, the less likely it is that individuals will litigate over assets owned by your estate.
- Strict adherence to a proper estate plan can assist your estate and your designated beneficiaries from having to deal with going through probate court. Putting in place a living trust is a tool that parties commonly use to help keep their estate assets from having to be probated. The probate process is a public process, so the proper use of trusts can not only help avoid or minimize the hassles associated with probate court for your loved ones, the proper use of trusts can also help keep matters relevant to your estate private. Depending on the situation, certain trusts can also be used in order to minimize tax consequences, as well as, to control assets distributed for the benefit of spendthrifts, or for other persons who due to physical or mental disability, are simply unable to adequately look after their own financial affairs.
In summary, appropriate estate planning is not only a prudent endeavor from a financial perspective, it is also caring of you to complete it for your loved ones. It will be hard enough for those you leave to have to deal with your loss, but causing loved ones through your neglect to have to deal with avoidable issues relative to your estate, without appropriate direction from you that is, this can make the circumstances you leave behind difficult and unnecessarily disorderly or ripe for potential litigation or increased family tension.