Reasons You Need an Estate Plan

For most individuals, taking the time to put an estate plan in place may seem like a daunting task. Not realizing the importance of having an estate plan is another common reason why it is often why it is put off until later. Most individuals don’t know if or why an estate plan is needed, especially when there is not a significant estate. However, estate planning is not one-size-fits-all, and it is meant to be tailored to your specific needs, no matter how big or small. Not everyone will need or want an in-depth or all-inclusive plan. For some, a simple document is enough, while others may require complex trusts established.

What Estates Plan Do

An estate plan lays out exactly how you want your affairs handled in the event of your death or incapacity. Your needs and precise wishes will determine what specific documents are required, however, most estate plans should consist of at least a Last Will and Testament, a Living Will and a Power of Attorney. With the appropriate documents in place you are able to do the following:  

1. Transfer your assets to your intended beneficiaries in the event of your death. Without a will, property will transfer to whomever the state dictates under a strict process known as intestacy, which means in the absence of a will.  
2. You are able to name a trusted guardian for any minor children that you have, both of their personal and financial affairs.
3. A Power of Attorney can name a trusted guardian for your own physical and financial affairs should you become incapacitated and unable to act on your behalf.
4. Minimize your loved ones’ disagreements and confusion that may arise in trying to guess what your wishes are.
5. Minimize taxes in some situations and reduce costly estate administration costs for your loved ones

Why Do You Need an Estate Plan? 

If you are still asking yourself if you need a plan to accomplish any of the things listed above, then ask yourself the following questions: 

1. Are you worried about leaving funds to a minor or another family member? Without having any restrictions in place, funds generally transfer in one lump sum to a beneficiary. Some financial accounts and life insurance proceeds pass to beneficiaries in a large amount, if not otherwise protected, and if the beneficiary is immature you may be concerned about them having access to that much money at one time. Placing funds in a revocable or other trust can provide peace of mind knowing the funds will be safeguarded from any immature spendthrifts.
2. If you have a special needs child or another beneficiary who relies upon means-tested benefits such as social security or Medicaid, leaving them any type of property or funds without proper planning can jeopardize their ability to continue receiving benefits. However, with planning, you can ensure they receive what you intend in a way that won’t disqualify them from receiving the assistance they require.
3. Blended Families / Second Marriages – For couples that have children from a prior relationship and do not wish for their current spouse to inherit everything, or want their children to have specific assets, then it is critical to have an estate plan to safeguard your estate for your children. Depending on your situation and estate there are many options available that we can assist you in developing.
4. Will you need Skilled Nursing Care in a Nursing Home? Skilled nursing care is expensive and can quickly drain financial resources if you don’t qualify for Medicaid assistance. In order to qualify for assistance, there are strict limits about property and income you are allowed, along with a lookback period of 5 years to ensure you haven’t transferred property to become eligible. Proper planning well in advance of having to go into a care facility allows you to protect your estate for your children and receive the necessary assistance you need.
5. If you have significant wealth, or a net worth that would exceed the Federal Estate Tax Exemption, which is currently 11.16 million, per individual, you can put a plan in place to transfer your wealth and minimize the estate tax liability for your loved ones.
6. Even if significant wealth isn’t an issue, if you have a retirement plan, like a 401(k) or IRA, and you fail to properly designate it, it passes through your probate estate, and it will most likely be liquidated. If it is liquidated it can have a negative tax liability on your estate, reducing what your loved ones will receive.

Making an estate plan doesn’t have to be a long drawn-out process. Our attorneys at Hopper Cummings have extensive experience in creating effective estate plans and are here to guide you through the process. If you need help in creating an entirely new plan or need an existing plan reviewed and updated we can help you make the plan that fits your estate. Contact us today for a confidential consultation at 919-533-4115, or complete our online form.