“Death is not the end. There remains the litigation over the estate”
The term “estate planning” is often associated with wealthy individuals.
The reality is that regardless of your income level, you need to consider what happens to your assets when you die and who the recipient of your possessions will be when you pass away.
Estate planning does not need to be a complex affair.
An estate plan can be simple. For instance, you could have a will and name a beneficiary for your retirement 401(k) plan.
Of course, it can be complex – you could have several trusts where you allocate things for different purposes in addition to having a will.
What is an Estate Plan?
Simply put, an estate plan is the orderly administration and disposition of property after the owner dies.
While individual estate plan goals vary, the goals of your estate plan may include the following –
- Reducing confusion as to your final wishes upon your death
- Specifying a legal guardian of your choice for you children
- Ensuring your loved ones are protected by receiving your assets
- Avoiding or reducing conflict among family members upon your death
- Minimizing taxes and legal expenses associated with your estate
- Preserving wealth for your intended beneficiaries.
- Flexibility for your personal needs before you die
Dying Without an Estate Plan
When an individual passes away without an estate plan that includes a will, that individual is said to have died intestate.
When someone dies intestate, the state where you live will determine who gets your assets as determined under the state's inheritance laws.
When this happens, it could mean that some of the people you love are left out of the distribution.
What happens if there is no one that fits that criteria? Who keeps your assets?
If you guessed the government, you would be correct. There is also big estate tax considerations to be made.
Non-Traditional Relationships and Estate Planning
If you are in a non-traditional relationship – estate planning is a must.
A non-traditional relationship covers if you have chosen to cohabitate without being married, if you have been married more than once and/or you have children.
Now if you have children from a previous marriage, your estate planning is even more important, as your current spouse or partner may not want to share your estate with your previous children unless required to do as based on the provisions of your will.
Don’t make the mistake of unintentionally disinheriting someone you love because you failed to implement a plan.
Basic Estate Planning Terms
The estate includes all the property that was owned by a decedent – the deceased- before it is distributed by a will, trust or via a state’s inheritance laws. This includes all of the decedent's assets and liabilities.
There are two categories of property:
- Real property – referring to land, which includes permanent structures and minerals.
- Personal property – this is anything other than real property this can include things like automobiles, jewelry, household items, patents, loans, bank accounts etc.
The grantor is the person transferring property to another party – who is referred to as grantee -under a trust that he or she created.
The beneficiary is the person – or persons – who are named to inherit property from the grantor.
A trustee is the person or entity who administers the property on behalf and for the benefit of the beneficiaries in accordance with the trust document. Trustees are fiduciaries.
A person or entity that takes over the duties assigned to the original trustee when needed.
Probate is the legal process the state takes through the court to identify your rightful heirs. The state will also identify your heirs share, and transfer the title of property from your name to theirs.
Estate transfer is the process by which property interests are legally transferred to another person.
Estate Planning – Why?
Estate planning is a must for anyone who has ownership in real or personal property. This includes –
- Individuals who own property alone,
- Individuals owning assets located in multiple states
- Individuals with dependents.
- Small business owners
- Individuals at risk of becoming incapacitated
- Individuals wanting to make wealth transfers
- Individuals owning assets that may possible be subject to tax and wish to minimize expenses incurred with transfer
Estate planning is a must. The real consideration is how simple or complex do you want your plan to be?
If you own property and/or assets you owe it to your loved ones to have a plan in place for your estate.