One of the most unfortunate popular misconceptions is that estate planning is only for the rich. Nothing could be further from the truth. Even if your means are modest, failure to create an estate plan could cause a lot of trouble for your loved ones after you pass away. A skilled estate planning attorney can help you create an estate plan that effectively addresses your needs as well as the needs of your loved ones.
What Is Estate Planning?
Your estate is everything you own when you die, both tangible and intangible. It includes your house, your car, the contents of your bank accounts, your investments, your personal possessions, etc.
An estate plan contains your decisions on the distribution of your property after you die. This is why everyone needs an estate plan.
What Should You Include in Your Estate Plan?
A typical estate plan typically includes four primary elements:
- Your last will and testament, which distributes your estate assets.
- A financial power of attorney gives someone the authority to manage your finances if you become incapacitated.
- An advance health care directive appoints someone to make medical decisions for you.
- A trust controls the distribution of your assets before and after you die.
Naturally, estate plans vary from person to person.
Why Is Estate Planning Important?
What is the importance of estate planning? Estate planning is important because determines who will make decisions for you if you are incapacitated and who will receive your assets at your death. Following are some of the main benefits of an estate plan.
It Saves Time and Money
If you don’t make decisions on how to dispose of your property while you still can, California state law and probate courts will make those decisions for you. But what does a probate court judge know about you, your family, and your priorities? If you don’t leave an estate plan, proceedings could drag on for years and generate a mountain of legal fees that your estate would end up paying.
It Protects Your Beneficiaries
If you die without leaving a valid will, you will die “intestate”. In the event that you die intestate, California intestate succession law will apply. This law will distribute your assets among your relatives according to the formula set out in the law. Since you left no will to appoint an estate administrator, the probate court will appoint one. Normally, the court will appoint your surviving spouse. If the court cannot find a relative to do the job, it will appoint a government agency or private professional.
It Protects Your Children
If you are a parent of dependent children, ask yourself what would happen to your children if you and the children’s other parent both died before your children turned 18? Without an estate plan, a judge – a stranger to everyone in your family – will decide who will raise your children. If you create an estate plan, however, you can name guardians in your last will and testament.
It Can Help Avoid Taxes
How much of your estate assets would you like to donate to Uncle Sam instead of to your intended beneficiaries? A lot depends on how you create your estate plan. Although only the largest estates owe estate tax, a poorly designed estate plan could end up requiring your beneficiaries to pay more taxes than they need to.
It Can Prevent a Family Civil War After You Die
The chances of family conflict over the distribution of your assets will multiply if you die without an estate plan. Unfortunately, a poorly designed estate plan with a badly drafted will can spark more conflict than no estate plan at all. In addition to the bitter conflict that could take years and a lot of money to resolve, the psychological wounds might never heal.
It Might Be Helpful Even Before You Die
Nearly 10 percent of senior adults are living with dementia at any given moment, and some who are free of it now will not die free of it. There is no way you can know that it won’t happen to you someday. Imagine dishonest relatives looting your wealth without your knowledge. Imagine someone making disastrous medical decisions on your behalf.
A well-considered estate plan can prevent this from happening. You can appoint someone you trust to manage your finances with a power of attorney, for example. You can state your wishes on end-of-life medical care in a living will, and you can appoint someone you trust to make unexpected medical decisions for you.
Don’t Let Circumstances Control You
The California estate planning lawyers at Barr & Young can help you create an estate plan that is tailor-made to suit your individual needs and priorities. Don’t wait until the last minute to begin. Contact us today online, or by telephone at (925) 660-7544.