While you may not have the sprawling kind of estate with acres of lawn, dozens of grazing horses and multiple tennis courts, you do actually have an estate. Your estate is comprised of the things you own: your home and vehicles, retirement accounts, bank and investment accounts, jewelry and family heirlooms, to list a few possible assets you may own.
The “plan” part comes into play as you set up a strategy on how to handle your assets after you’re gone. Consider working with an experienced estate planning attorney who has tax planning law experience to distribute your assets effectively and according to your wishes.
Estate planningis not just for the wealthy
Everyone should have a plan. If you don’t have a will, for instance, your family could argue and possibly go to court fighting over who gets that comic book collection of yours. Your assets will be tied up and be reduced while court costs and fees nip away at it.
Understanding estate planning
Estate planning doesn’t have to be difficult. By answering a few questions, your attorney can work with you to develop an estate plan that is tailored to your needs. The questions:
- What is the purpose of your estate plan? Ideally, it should be to address both what happens to your assets after you die and what happens to you and your estate should you become mentally incapacitated.
- Who owns what? How your property is titled will affect who ends up with the property. For example, if you and your brother share ownership of a property and you leave it to your daughter, she will not get anything. It will all go to your brother.
- Which taxes will affect your estate? Estate taxes, gift taxes, generation skipping transfer taxes and income taxes are the most likely taxes to impact your estate.
- Do you need a revocable living trust? This document accomplishes several things:
- Control: You can control what happens to you and your assets while you’re alive and healthy, if and when you become incapacitated and after you have passed away.
- Quick asset transfer: Asset transfer can typically happen much faster than with a will because the probate court isn’t involved with trusts.
- Cost reduction: Avoiding probate and estate taxes can save you money.
- Privacy: Your financial affairs won’t become part of the public record.
- What estate planning documents do you need?
- A will to not only distribute assets, but to name a guardian for your children
- Trusts such as special needs trusts, revocable living trusts and irrevocable trusts
- Advanced health care directive specifies what actions should be taken for your health if you are no longer able to make decisions for yourself
- Power of attorney to have someone manage your finances
- How do you want to pay your beneficiaries? There are many options on how to leave your assets to your beneficiaries. It could be all at once, in stages or in trusts. Minor beneficiaries will be treated differently than adult ones.
- How often do you review the plan? Circumstances change, laws change, things happen. A periodic check will make sure your plan is still going to meet your goals.
Benjamin Franklin is credited with the adage, that if you fail to plan, you plan to fail. The failure in this case would be probate and Massachusetts’ intestate succession rules determining who gets what—and not you. You can help make sure your loved ones are taken care of with an estate plan.