Quick question: Who needs an estate plan? The answer is everyone, not just the affluent. While gift and estate tax liability is not an issue for most folks, most families can benefit from a comprehensive plan that divides their wealth, protects their well-being and provides a compass for the future.
Estate planning is often associated with the division of assets and this is certainly a key component. It is typically accomplished, for the most part, by drafting a will which is the foundation of an estate plan.
With a valid will, you determine who gets what, where, when and how. It can cover everything from the securities in your portfolio to personal property, such as cars, artwork or other family heirlooms.
In contrast, if you die without a will — referred to as dying “intestate” — state law will control the disposition of your assets. This may result in unintended consequences. For example, children from a prior marriage may be excluded if state law dictates that all assets are to go to a surviving spouse.
In addition, you will need to name the executor of your estate. He or she will be responsible for carrying out your wishes according to your will. Your executor may be a professional, a family member or a friend. Also, designate a successor in case your first choice is unable to handle the duties.
If your estate plan includes only a will, your estate will most likely have to go through probate. Probate is a court-supervised process to protect the rights of creditors and beneficiaries, and to ensure the orderly and timely transfer of assets. The complexity and duration of probate depend on the size of your estate and state law.
The power of a power of attorney
An estate plan also can help ensure that your long-term health care is handled in the way that you wish. Notably, you can create a health care power of attorney. It grants another person ― for instance, a family member or a friend ― to act on your behalf in the event you are incapacitated. A power of attorney may be coordinated with a living will specifying your wishes in end-of-life situations and other health care directives.
Putting your wishes in writing
Finally, an estate plan can accomplish a variety of other objectives, depending on your preferences and circumstances. If you have minor children, name a guardian in your will in the event of your premature death. Without such a provision, the courts will appoint a guardian that may not be the one you would choose.
Your estate plan can also protect against creditors, primarily through trusts designed for these purposes. Accordingly, while trusts were often seen mainly as tax-saving devices in the past, they can fulfill a multitude of other roles.
There is one last document that ties up some loose ends. Although a “letter of instructions” is not legally binding, it can express your wishes about numerous matters ranging from burial arrangements to the religious upbringing of children. It may also provide an inventory of your assets and their location.
Now is the time to act
The benefits of having an estate plan are clear, so what are you waiting for? Contact your attorney or ORBA advisor sooner rather than later to learn additional details.
Related Read: Divorcing? Don’t Let Your Estate Plan Fall Through the Cracks
For more information, contact Jeffrey R. Green at [email protected] or 312.670.7444. Visit ORBA.com to learn more about our Wealth Management Services.