Many Americans spend time planning their vacations, which vehicle to buy, or where to go out for dinner. But far too few devote time to planning who will inherit their property after they are gone. Without proper estate planning, your money and assets may not go to the people you wish. That's why estate planning is so important.
Learn below why you should make an estate plan today, then speak to a Vero Beach estate planning attorney in your area.
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What Is An Estate Plan?
An estate plan is a series of legal documents that detail how you want your assets to be dealt with and distributed when you die or become incapacitated. Assets that may be part of an estate plan include your home, investment properties, retirement accounts, bank accounts, businesses, and more.
Recent inflation has made more people realize they should have an estate plan. Surveys also show that many younger adults need a will and estate plan in their middle age. However, only 34 percent of Americans report making a will or setting up an estate plan.
Many put off estate planning because they aren't motivated or assume they don't have the assets to make it worth it. However, people with any assets need a proper estate plan.
The plan will lay out important matters about your finances and health if you die or are incapacitated. If you have put off doing an estate plan, below are important reasons to start by talking to an estate planning attorney today.
Why Should You Have An Estate Plan?
There are many reasons why most people should have an estate plan as soon as possible:
An Estate Plan Protects Your Beneficiaries
People once considered estate planning something only millionaires did. But things are different now. Today, most middle-class families should have a plan if something happens to a breadwinner.
After all, you don't need to be worth seven or eight figures to be prosperous in real estate, cryptocurrency, or the stock market. If you have made any money, you want to ensure that your property and cash will go to your desired beneficiaries.
Even if you only have your residence and little else, if you don't state who should get the property, you don't have any control over who gets it. That is because the major part of estate planning is designating who will receive your assets. Whether those things are a stock portfolio or a house, you should have an estate plan.
Otherwise, the courts may decide who gets what, which can take years and cost the estate a lot of money. You don't want courts to decide who gets the assets because it can be a huge family disagreement. Also, the court will not necessarily decide that the surviving spouse inherits everything.
An Estate Plan Protects Small Children
Most people never think about dying young. But if you have small children, prepare for the unthinkable because accidents can happen anytime. This is where the will part of your estate plan is important.
To make sure that your children are well taken care of, you will need to name a responsible person as their guardian if both parents die before they turn 18. If a will doesn’t name their guardians, the courts will decide who will care for your kids.
An Estate Plan Can Avoid Taxes
Focus on caring for your loved ones is the essence of estate planning. This also means protecting them from taxation, if possible. A critical part of a solid estate plan is transferring money and property to others with the smallest tax burden.
Even engaging in a small amount of estate planning can allow you to reduce some or even all of the federal and state estate tax burden you may have. There also are effective strategies for reducing the income taxes your beneficiaries can be responsible for. Without an estate plan, the taxes that your heirs have to pay can be much more.
An Estate Plan Eliminates Family Squabbles
Imagine if you pass away and there is a major family disagreement over your assets. The last thing most of us want is a war between family members about property and money.
One sibling might think they are entitled to more than the other, or one may want to be in charge of finances, even though they are in debt. These family fights can get nasty and go to court, with one side of the family lined up against the other.
A solid estate plan can prevent most family disagreements over your property. An estate plan states who will control the finances and assets if you are mentally unfit or after you pass away.
Designing the estate plan to accommodate individual needs is also possible. For example, setting up a plan to assist your child with health issues or establishing a trust for one who may be better off without a windfall is possible. Also, dividing everything 50/50 using your estate plan may not be possible if you have many children or previous spouses.
An Estate Plan May Avoid Probate
Avoiding probate is an important reason that people see an estate planning attorney. Anyone who has to deal with strain, stress, and the cost of going to probate knows that it's smart to avoid it if you can.
Probate is the legal process that occurs after the person passes away. It usually involves showing the probate court that the person's will is valid, appraising the property, and paying and assigning debts and taxes. Probate is complex and expensive.
The process usually involves attorneys and court fees that the estate must pay, which consumes resources that might have gone to beneficiaries. Many people use trusts to avoid probate, which can immediately transfer some of your assets to your heirs.
An Estate Plan Helps You Give To Charity
Do you like to give to charity? You can use your estate plan to give money to causes you support. Intestacy laws don't cover charitable contributions, so if you don't have an estate plan, you cannot give to your favorite causes.
The only way you can donate to charity when you pass away is with an estate plan. If you are worried about taxes, charitable estate planning can give you tax breaks you may not know.
What Is in an Estate Plan?
There are several important sections in an estate plan.
Yours can differ, but most have the following parts:
- Will: The will documents your preferences for asset division after you pass on. They will also have information about who you want to care for small children. The probate court will oversee the distribution of assets according to the terms outlined in your will.
- Property power of attorney: This is also called a financial power of attorney. This party handles your financial and property matters if you cannot do so because of death or incapacitation. For instance, if you're in a car accident and a coma, this party will handle your bills and other financial matters.
- Healthcare power of attorney: This person will make major healthcare decisions if you are incapacitated. If you are moving far from family, you should name someone to make your major healthcare decisions if something happens.
- Advanced directive or living will: An advanced directive gives instructions about end-of-life matters if you cannot do so. For example, an advanced directive can lay out if you want life-sustaining measures performed.
- Trust: Trusts can offer many financial benefits that a will does not. A revocable trust keeps important financial information from going into probate and allows for your assets to be cared for if you are disabled or incapacitated before death. A revocable trust lets you benefit from your asset while you are alive.
Your estate plan will also name key parties to take up various duties if needed:
- Property and healthcare powers of attorney: Who will you want to make key medical decisions and handle your finances if you can't make them? The person can be your spouse, family member, or friend who knows your wishes.
- Guardian: If you have small children, you must name a guardian until they turn 18.
- Executor or trustee: Being a trustee on an estate can take time, so you should choose someone you both trust and have the time. You can also appoint a corporate trustee to collaborate with your trustee, ensuring proper investment of funds, filing taxes, and keeping beneficiaries informed.
Common Myths About Estate Plans
Now that you understand more about estate plans, let’s to point out some of the common estate planning myths you see online:
- Only older people need an estate plan: Most of us live in old age, but you cannot predict the future. When your family has assets and beneficiaries, you should talk to an estate planning lawyer. This can be important for people as young as their 20s.
- Estate planning is only for the rich: Your heirs will want your affairs to be in order when they want to collect an inheritance. Whether your estate is worth $10 million or $100,000, consulting with an estate planning attorney is beneficial.
- Drafting an estate plan is expensive: The estate plans for many middle-class families are not as expensive as you think.
- I don't need an attorney: Whether your situation is easy or complicated, it's best to have an estate attorney review your plan. Your estate plan might be solid, but it can be unenforceable after you pass away because of legal errors.
- The state will get my property: Your state's intestacy laws usually ensure your assets will go to your children and spouse even if there is no will. But estate planning will ensure that everything goes to the person you want.
- Setting up a trust is the only way to stay out of probate: It's a way to avoid probate, but your attorney may recommend less expensive options.
- Trusts don't have to pay estate taxes: Most trusts cannot avoid estate taxes alone, but they may be part of a legal strategy to reduce your taxes.
- I don't have sufficient money for estate taxes to kick in: Estates worth a few million dollars can be subject to inheritance taxes, so you should talk to an estate planning attorney to consider options.
- I'll have to pay gift taxes: If you give $18,000 in gifts (as of this year) to people yearly to reduce your estate, you don't usually owe a gift tax until you use the whole exclusion amount. As of now, the lifetime gift limit is $12.92 million.
Estate Planning Is a Process
Putting together an estate plan is critical. But it is merely the first step. After you set up your plan, review it regularly.
Remember, life changes. People get divorced, have children, die, and new laws can happen anytime. Professionals recommend reviewing your estate plan at least once per year for any life or situational changes.
How To Choose An Estate Planning Attorney
There are many estate planning attorneys out there. How do you know if you have a good one?
Some things to look for in your attorney are:
- Focuses on estate planning: Estate planning is a complex subject, so you should have an attorney who focuses on it. You should not do estate planning with a workers' compensation attorney.
- Is the attorney a published author? Inquire if the attorney has published any books or papers on estate law. This is a sign of a lawyer with experience and experience.
- Does the attorney belong to a professional organization? It is also a good sign if the attorney belongs to a major organization, such as WealthCounsel.
- Look for experience: The attorney should have years of experience in estate planning with proven results.
Speak to an Estate Planning Attorney Today
Do you want your assets and property protected and to go to the people you want when you pass away? Then, you should have a comprehensive estate plan. Without an estate plan, your loved ones may face substantial tax bills, and the courts might dictate the division of your assets.
Contact an experienced estate planning attorney today to determine how to secure your assets, legacy, and family's future.