Estate planning is the management of a person’s assets accumulated during their life and after their death. An estate can be everything that an individual has accumulated over their lifespan including cars, a single family home, apartment building, jewelry, real estate, bank accounts and any other type of property. Regardless of how wealthy or poor a person is, they have an estate.
All people should have their estate in order before they pass on. This can reduce squabbling between family members and avoid drawn-out probate. People need to understand that at some point death is something that cannot be avoided; it is inevitable. And like the old saying goes, “You can’t take it with you.” It is always a good idea for a person to control their estate, so when they die, the wishes regarding which people, charities, and organizations they want their assets to go to are carried out.
That, in a nutshell, is the linchpin of estate planning — naming in advance where you want your assets to go. However, estate planning can be a bit more complex. There are many other issues that should be addressed:
- Instructions on the passing of values such as religion, education and work ethic.
- Name a caretaker or executor if incapacitated before you pass away.
- If there are minor children, name a guardian.
- Provide for special needs family members in a way that it doesn’t interfere with government benefits.
- Include life insurance for family members.
- Funeral arrangements.
Sadly, there are a number of individuals who simply put off getting their estate in order for unknown reasons. When this happens, it is often the surviving family members left holding the bag. Not having a plan in order can prove problematic if you are disabled before death, or when you die. While each state is different when it comes to its laws, if a person dies without a proper plan in place, the state will step in and distribute assets according to state law.
In most states, assets are shared among the children and the spouse. But if both parents die and there is no plan in place or beneficiary, the court assigns a guardian or trustee. It is always best to have control of the estate so the children’s inheritance is not jeopardized.
The first step of getting estate plans in order is to draw up a living trust or will. While wills provide instruction, it won’t stop the probate process, and this can be a nightmare. It is controlled by the court system and could take up to two or more years for resolution. It can also be expensive once court fees, attorney fees, and executor fees are paid.
Some things won’t go through probates, such as 401Ks, life insurance, and annuities, which allows the trustor to name a beneficiary. But the asset distribution of minors will still be at the court’s discretion.
This is why a living trust is the preferred method of asset management and distribution. After death, a trustee manages the estate until minors, who are beneficiaries, reach a certain age. The trust also puts in place protections from abuse and mishandling of its assets. So, it is a good idea to hire a lawyer to get the paperwork in order.
Speaking of probates, in the state of California they can be far more expensive than a living trust. A $600,000 estate will cost a minimum of $15,000, as opposed to the cost of a trust, which runs about $3,500. This should also be taken into consideration when dealing with estate planning.
Estate plans don’t have to break the bank. There are a number of experienced attorneys who can draw up the paperwork for a reasonable cost. While you are alive, it is important to get the ball rolling on the process. Adjustments can be made as seen fit. A lawyer can guide a client and answer all of the important questions.
People should understand that a good estate plan is part of the life and death process. Leaving a family in a state of financial flux after death can be devastating. Individuals should consult with an attorney regarding these matters as quickly as possible. There is no age limit, and it can be done even in younger years.
The key is protecting the assets and the children’s inheritance. It is important that every asset that is owned is protected. It doesn’t matter how big or small. This issue is time-sensitive and should be addressed at the earliest convenience. Loved ones have enough to think about when the death occurs. There is no need for them to experience more stress over the estate.