Why do I Need Estate Planning
What is Estate Planning?
In basic terms, estate planning is the legal process of dictating what happens to your belongings and assets after your death, and delegating who can operate on your behalf if you should become incapacitated. This applies not only to the distribution of financial assets, but also includes personal belongings, property, any business interests, and also designating guardianship for minors and/or pets. While estate planning is highly recommended for all adults, it is especially imperative for parents/guardians of minor children, high-income and high-net-worth individuals, and business owners.
Types of Estate Planning Documents:
We’re not estate attorneys, so I’ll just touch on the basics. The main types of estate planning documents are wills, powers of attorney, and trusts. Some of these are still subject to the probate process, which entails courts verifying the validity of the documents and the requests made within them, as well as officially determining the executor to assist in the transfer of property. This can potentially be a long and drawn-out process, and can incur substantial fees for the involved parties. It’s important to understand that each state has different laws governing estate planning documents, so our recommendation is to seek out a qualified estate planning attorney to answer your questions and guide you through the process.
These are the basic components to virtually all estate plans. Although there are a few different types of wills, they each serve one of two purposes. The first is the most common association the general public has of wills, which is to direct where your property goes after your death and designate guardians for minor children and pets. The second, a living will, allows you to dictate how you will be treated in the event you become incapacitated. The majority of these are subject to the probate process.
Power of Attorney:
A power of attorney grants an individual the authority to make decisions on your behalf. The two most common types are a durable power of attorney and a healthcare power of attorney. In general, a durable power of attorney will be authorized to act on your behalf for all financial matters and day-to-day decisions while you are incapacitated, and will have access to all your assets. In contrast, a healthcare power of attorney is authorized to make all medical decisions on your behalf while you’re incapacitated. This can be used in conjunction with, or in place of, a living will. Given the responsibility bestowed upon these individuals, it is highly recommended to carefully consider who you designate for these positions, and to have at least a few alternatives listed.
There are a number of different types of trusts, each with their own specific purpose and objective. However, they all fall within two basic categories, revocable and irrevocable. A revocable trust, as the name implies, can be changed or revoked after it’s created. An irrevocable trust, on the other hand, cannot be changed once it’s established. Trusts can provide much of the same aspects of a will, but typically allow for much more detailed direction and additional protections. Many trusts also help avoid probate, and have many other unique and specific benefits depending on your needs.
What happens if you die without Estate Planning:
If you die without estate planning, it’s called “intestate”. The laws and regulations for this vary state to state, so you’ll want to check your state laws or talk with a local estate attorney. Generally, this involves a probate court distributing your assets in a manner determined by your state’s intestacy laws, and will likely involve a complicated, lengthy, and expensive process for any surviving heirs. In North Carolina, your estate will be split in a pre-determined manner to your nearest surviving relatives – spouse first, then children or parents, grandchildren, siblings, grandparents, aunts & uncles, etc.
If you had any jointly held accounts with right of survivorship, the joint account holder will become the sole account owner. Any bank accounts, investment accounts, insurance policies, etc., with a listed beneficiary or transfer-on-death designation will automatically go to that individual (or a guardian of that individual in the case of a minor).
What happens if you become incapacitated or incompetent without Estate Planning:
As I’ve said before, laws on these topics vary from state to state, so it’s important to know the laws in your state and to contact a licensed estate attorney in your area if you have questions. If you become incapacitated or rendered mentally incompetent without having any power of attorney in place, it can wreak havoc on not only your life, but on the lives of your loved ones as well.
Without a durable power of attorney, no one will be allowed to make payments on your behalf, which could cause the repossession of assets and the cancellation of services. Also, no one will be able to manage your banking or investment accounts, so you may not be able to access your money to provide the care you need. Eventually, the probate court will likely get involved and appoint someone to manage your accounts for you, which may or may not be someone you know. At best, it will likely be an annoying and complicated process for you and your loved ones.
Without a healthcare power of attorney, it’s likely to be a similar scenario. Only this time it involves your healthcare instead of your personal assets. While it may be a family member who gets appointed, it also may be a doctor and complete stranger who ultimately gets to decide your fate.
Benefits of Estate Planning:
Proper estate planning is one of the best forms of risk management. Although most people don’t exactly like to think about their own death, the fact of the matter is that death is inevitable and often unpredictable. The best course of action is to have your plans in place so that when you do eventually kick the bucket, everything you’ve worked so hard to accumulate all your life will be distributed as per your desires, not someone else’s.
Thorough estate planning typically only needs to be completed once, with occasional changes as laws and/or your personal situation or desires change. It’s virtually a set-it-and-forget-it item that can provide you with peace of mind for years to come. Thorough estate planning allows you to dictate exactly where your belongings will go when your time comes, and can be as simple or as complex as you would like.
Though the actual benefits you’ll receive from getting your estate planning in order will vary greatly depending on your unique situation and objectives, here is a list of the most common and basic benefits:
- Your assets and belongings are distributed as per your wishes, not someone else’s.
- Someone you trust will handle your affairs if you are no longer able to
- The medical treatment you receive will be congruent with your wishes, even if you are unable to make those decisions.
- Your children and/or your pets will be cared for by someone you trust and have appointed.
- Any disputes, headaches, and financial burdens to your loved ones are greatly reduced, if not completely avoided.
- Some planning can completely avoid probate, providing loved ones with immediate access to your assets.
- Some trusts can shield your assets from the public eye, keeping the creditors and scammers at bay.
- High net-worth individuals can provide generational wealth for their heirs.
- Some trusts can help minimize or avoid some tax liability.
- Business owners can dictate how their business will be managed and who will take over.
- You receive piece-of-mind knowing your loved ones will be taken care of after you’re gone.
Obviously, this list it not exhaustive. There are many other benefits to completing comprehensive estate planning that are specific for your unique situations. While we are not estate planning attorneys, we do highly recommend that you get your estate planning completed. We at Bowers Private Wealth Management work closely with a handful of attorneys in our area to help connect our clients to professionals who will help them define their wishes, and create the necessary documents to insure those wishes are upheld. Once the estate plan is in place, we help our clients confirm nothing was overlooked, and handle the burden of updating and/or creating accounts on their behalf. We know estate planning can be a burdensome process, and we do what we can to help minimize that burden for our clients.
If you have any questions, or simply would like more information, please feel free to contact us at firstname.lastname@example.org or by phone at (984) 308-1908, and we’ll be happy to schedule some time to speak with you.