The purpose of estate planning is to maintain autonomy. To make your own decisions, and avoid others getting involved in your personal matters. Done properly, an estate plan can save hundreds of thousands of dollars in taxes and professional fees. When a person becomes disabled or dies without an estate plan, the options are limited, usually expensive, and nearly always involve the courts. That involves lawyers, fees, and administrations that last months or years. Is that what you want? Is that what you want for your family? Having a good estate plan is about control, in the best sense. It’s about self-control.
A good estate plan eliminates problems with all of the following:
A good estate plan provides for emergency decision-making, should you become disabled. For example: You’re in an accident, suffer a concussion, and can’t make your own decisions for a few weeks. Who will talk to the doctors to give consent to treatment? Who will pay your bills? If the disability lasts more than a month, who will apply for disability benefits, contracts, or sues on your behalf?
Powers of attorney and health care directives are simple, effective ways to provide for emergency decision-making. They are powerful documents and should never be given to someone who hasn’t proved his or her honesty over a long period of time. Spouses do not have the legal authority to make decisions for each other. Most people don’t understand this. With no estate planning, one spouse cannot make medical or financial decisions for another, in the event of disability.
Probate is the court-supervised system for transferring assets of a decedent to heirs and devisees. Someone (usually a spouse, child, or parent) has to hire a lawyer to petition the court for appointment as personal representative. A court hearing is often required, as is formal notice to relatives and creditors. The will, if there is one, becomes a public record. If the person died without a will, state statutes determine who takes the property. The average length of a probate 18 months and the average cost is 3% of the estate. Probate is required when a person dies with more than $50,000 in assets that are not held in joint tenancy, don’t name a beneficiary, and are not in trust. If a person dies owning property in several states, there will have to be a separate probate in each state.
Good estate plans avoid probate at a fraction of the cost and time of a probate. While keeping you in charge, not the courts. The easiest probate avoidance is with revocable trusts. They are more flexible than wills, more easily updated and changed, and can hold property in every state.
Persons with a disability are at greater risk of losing their autonomy and power than a non-disabled person. If someone important to you has a disability, he or she must be provided for specially in your estate plan. A child under the age of 18 is under a legal disability (whether otherwise disabled or not). This means the child cannot receive an inheritance directly. Naming a minor child as a beneficiary in a will or on a life insurance policy causes expenses and delays that could easily have been avoided. The same is true for a disabled parent or sibling. Leaving funds to such individuals could cause them to become disqualified for other programs they might otherwise be eligible for. Basic estate planning eliminates all these problems.