Many people think that estate plans are for someone else, not them. They
may rationalize that they are too young or don’t have enough money
to reap the tax benefits of a plan. But as the following list makes clear,
estate planning is for everyone, regardless of age or net worth. (For
more information on estate planning, see our
Estate Planning
section.)
Loss of capacity. What if you become incompetent and unable to manage
your own affairs? Without a plan the courts will select the person to
manage your affairs. With a plan, you pick that person (through a power
of attorney).
Minor children. Who will raise your children if you die? Without a plan,
a court will make that decision. With a plan, you are able to nominate
the guardian of your choice.
Dying without a will. Who will inherit your assets? Without a plan, your
assets pass to your heirs according to your state’s laws of intestacy
(dying without a will). Your family members (and perhaps not the ones
you would choose) will receive your assets without benefit of your direction
or of trust protection. With a plan, you decide who gets your assets,
and when and how they receive them.
Blended families. What if your family is the result of multiple marriages?
Without a plan, children from different marriages may not be treated as
you would wish. With a plan, you determine what goes to your current spouse
and to the children from a prior marriage or marriages.
Children with special needs. Without a plan, a child with special needs
risks being disqualified from receiving Medicaid or SSI benefits, and
may have to use his or her inheritance to pay for care. With a plan, you
can set up a Supplemental Needs Trust that will allow the child to remain
eligible for government benefits while using the trust assets to pay for
non-covered expenses.
Keeping assets in the family. Would you prefer that your assets stay in
your own family? Without a plan, your child’s spouse may wind up
with your money if your child passes away prematurely. If your child divorces
his or her current spouse, half of your assets could go to the spouse.
With a plan, you can set up a trust that ensures that your assets will
stay in your family and, for example, pass to your grandchildren.
Financial security. Will your spouse and children be able to survive financially?
Without a plan and the income replacement provided by life insurance,
your family may be unable to maintain its current living standard. With
a plan, life insurance can mean that your family will enjoy financial security.
Retirement accounts. Do you have an IRA or similar retirement account?
Without a plan, your designated beneficiary for the retirement account
funds may not reflect your current wishes and may result in burdensome
tax consequences for your heirs (although the rules regarding the designation
of a beneficiary have been eased considerably). With a plan, you can choose
the optimal beneficiary.
Business ownership. Do you own a business? Without a plan, you don’t
name a successor, thus risking that your family could lose control of
the business. With a plan, you choose who will own and control the business
after you are gone.
Avoiding probate. Without a plan, your estate may be subject to delays
and excess fees (depending on the state), and your assets will be a matter
of public record. With a plan, you can structure things so that probate
can be avoided entirely.
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