Death and dying can be an uncomfortable topic for many. Considering that money and family dynamics can also feel taboo, it comes as no surprise that many people put off estate planning for as long as possible. At Schooley Law Firm, we pride ourselves on making these uncomfortable topics feel more manageable and educating our clients on the “why” of what we do. In that spirit, we are here to answer a few basic questions: what is estate planning, and why do you need one?
What is estate planning?
Put simply, estate planning is planning for your incapacity and death. While an estate plan can accomplish much more, at its most basic level, it ensures your wishes for your assets and your body/health are respected, even if you lack the capacity to speak for yourself or have already passed away.
An estate plan is unique to every client and situation, but there are a few common components: a will, a revocable trust, a power of attorney, and an advance medical directive. Each is explained briefly below.
A will is a document that disposes of your assets that are not otherwise controlled by joint ownership or beneficiary designation. Your will also appoints an executor, who will be tasked with seeing your estate through the probate process. Check out our other blog posts for more information on the roles of an executor. Finally, for those with minor children, your will can provide a strong recommendation to the court of who you would like to act as guardian of your children.
Revocable trusts are not necessary for everyone, but they can be helpful to many. A revocable trust is an entity that you create and fund with assets, with one of many goals being avoidance of probate at death. The revocable trust can work in tandem with your will to control the disposition of your assets and can provide for the assets to continue to be held in trust after you pass, rather than being distributed outright to your beneficiaries. This is often especially appealing to individuals leaving assets to minor children, since many parents (understandably!) do not want their minor children to have unlimited access to large sums of money.
A power of attorney also deals with your assets, but it is meant to plan solely for the possibility of incapacity. A power of attorney allows your appointed agent (your “attorney-in-fact”) to have control and access to your funds and accounts, with the goal of protecting your assets, paying your bills, and generally taking your place as the manager of your financial affairs in the event you become incapacitated. It is a role that requires a lot of trust.
Finally, unlike a will, revocable trust, and power of attorney, which all deal with your assets, your advance medical directive deals with your health and body. In the event you are incapacitated, your advance medical directive and your appointed healthcare agent are put in place to advocate for you and your health when you are no longer able to. They are also in place to ensure your healthcare wishes are respected.
Of course, there are laws in place that make these decisions in the absence of an estate plan, but these laws do not reflect your unique situation or family dynamics, and certainly do not provide for tax advantages! At Schooley Law Firm, we like to say that estate planning is opting out of the default rules.
Why do I need an estate plan?
A common misconception about estate planning is that it only benefits the wealthy. While it is true that some of the major advantages of estate plans are creditor protection, minimization of taxes, legacy building, and controlling the disposition of assets, these are far from the only benefits. Here are a few non-wealth related reasons to create an estate plan:
1. Protecting your wishes in the event of incapacity;
2. Making the estate administration process easier on your loved ones after you pass;
3. Taking the burden off of your loved ones of having to guess what you may have wanted; and
4. Providing for your children in the event of your early demise.
These are just a few of many advantages of estate planning that apply to everyone, and not just that “one percent.” Even if you do not have significant assets at this point in your life, but you are slowly building and growing, an estate plan can help with that growth not only during your life but for generations to come. You may think of an estate plan not as a step toward the end, but as an investment in your future and the future of many generations to come.
Estate plans are unique to each client and each situation, and at Schooley Law Firm we love the challenge and creativity in finding the right plan for our clients. Even the same clients may need drastically different estate plans for different points in their lives. If you already have an estate plan in place, but you recently acquired a new home or more assets, had a death in the family, or had a child, it’s time to revisit that estate plan. If you don’t already have an estate plan, call Schooley Law Firm, and we would love to take the time to get to know you, your family, and find the best plan for you.