To some people, estate planning may seem like an afterthought, or even an extravagance. But estate planning is actually critical to protecting your interests and your family.
What Happens Without Estate Planning
Although most states have laws about where property goes when a person without a will dies, making your own estate plan allows you to control what will happen after you have passed away.
In Minnesota, for instance, the assets of a person who dies without a will (intestate) are distributed according to intestacy statutes. While this provides some framework for transfer of assets, the statutory method may not be ideal, as it generally provides for equal shares to be distributed and does not take into account individual needs, such as how to provide for a child with special needs. Also, the estate of a person who dies intestate will need to go through the probate process, which can be complicated and expensive. The cost of the probate process will likely be deducted from the estate itself, leaving less for you to pass along to your heirs.
In short, if you pass away without an estate plan, your heirs will be forced to go through a court proceeding to determine who should care for your minor children and how any assets should be divided.
What Estate Planning Can Do for You
Estate planning creates a structure that can direct the distribution of your assets when you are not present or able to direct them yourself. It allows you to take all important factors into consideration, such as the needs of each heir, the usefulness of specific assets, and even which charities you would like to honor.
An estate plan also provides you with the opportunity to provide for your minor children, by designating guardians for their care and by setting up trusts for their financial needs. Doing this now, when you have time and ability to evaluate the choices in a calm and rational manner, can make a tremendous difference for your children should you pass away before they are adults.
Also, while estate planning is an expense, it is certain to cost less to plan your estate now than to go through intestate probate proceedings.
What Estate Planning Entails
Using estate planning doesn't merely mean writing a will; rather, estate planning is a group of tools including:
- Will, directing how specific assets are to be distributed upon death
- Trusts, setting aside assets with directions on how they are to be distributed, before or after the grantor's death
- Powers of attorney, designating a party to manage financial affairs under certain circumstances
- Health care directives (sometimes referred to as "living wills") - outlining health care desires in case of the inability to convey them
- Guardianship designations, detailing who will care for your minor children
All of these devices are vital to making sure that your wishes are known.
Before you can decide how your property should be distributed, you need to be certain of what type of property you have. Take inventory of your assets: bank accounts, retirement accounts, real estate, other investments, insurance policies, business interests and any other valuable property. Then decide how you would like those assets to be divided, and to whom.
It can also be wise, depending on the personalities involved, to discuss your estate plan with your heirs. This may particularly important if you have a unique plan or if there are likely to be questions about where certain specific assets should go. Involving your heirs in your planning process could prevent a drawn-out and expensive legal challenge to the estate plan.
Estate planning is for more than just the rich or the elderly. It is for every person who wants to have a strategy in place for how his or her legacy will be handled.
Meet with an experienced estate planning attorney, such as the attorneys at Burns & Hansen, P.A., soon to discuss your options.