It’s a common misconception that “estate planning” is only for the rich. But the truth is that we all have estates, because we all own things. Below are the top 3 reasons to for an estate plan.
1. Control over your assets
Think about the things that you own. Maybe you own a house, a car, a bank account or two. Maybe you have a 401(k) or an IRA or other employer-sponsored plan. All of this stuff is your “estate.” If you were to pass away, how will ownership of those things pass?
Some of your estate will pass by beneficiary designation or by the way you hold title. All of your jointly titled assets will pass to the other joint owners, all of your accounts and plans with beneficiary designations will pass to the beneficiaries, and everything else will pass according to the rules of “Intestate Succession.” Those rules are created by statute and apply when you die without a will. Surprisingly, how the government has decided to distribute your estate when you die may not actually be what you want to happen.
Having a will or trust in place can help avoid undesirable outcomes. It also allows you to give to whom you want, when you want, and how you want, sometimes even long after you’re gone.
2. Avoid a family mess
Although families sometimes fight even with a well-drafted estate plan, it is much less likely. A well drafted estate plan helps avoid fights by making your wishes clear, avoiding most issues of ambiguity about what you intended. Second, you can appropriately tailor your trust for your beneficiaries' circumstances; maybe one child has creditor or substance abuse issues or another isn't very good with money. All of this can be accomplished through proper planning. Third, a will or trust may include a “no contest” clause, which operates to disinherit anyone who challenges the will or trust except in certain circumstances.
3. Probate Avoidance
Probate is a court process of gathering up the assets of the estate, paying debts and creditors, and distributing the assets to the beneficiaries. When an individual dies without an estate plan or with a will then the probate process is often required. Attorneys are involved and are entitled to minimum percentage-based statutory fees. Additionally, while any court proceeding is likely to take time, some probate proceedings can last a year or more. Probate is a public ordeal requiring the public filing of documents and public notice to potential inheritors. Because of all of this, many people prefer for their families to avoid probate and the court’s oversight of the administration of their estate. Even worse, if a person owns real estate or other assets in more than one state, a separate probate is required in every state in which that property is located unless it is disposed of through a proper estate plan.
Courtney is the owner of Gaw Law, an estate planning law office serving the Sacramento, greater Sacramento and bay area. She helps individuals and families achieve peace of mind by planning for the future.