Important reasons why everyone should plan their estate, and an explanation of the basic estate planning documents that everyone must have.
Everybody’s heard it. Benjamin Franklin said, “in this world nothing can be said to be certain, except death and taxes.”
Estate planning encompasses both of these certainties. Your wish is to live life and not to dwell on the fact that no one is immortal. But failing to plan for how to protect your loved ones has to take priority. This applies if you die, and perhaps even more importantly if you don’t die but become incapacitated and unable to make your own decisions.
Failing to plan ahead through proper estate planning means risking that your intended beneficiaries – your loved ones -- may receive less than you wish whether due to extra administration costs, unnecessary taxes or fighting among your heirs.
Truly, estate planning is important, no matter how small your estate may be. Through proper planning, you can ensure that the people you want will receive your property, while making the inheritance process as quick and easy as possible. Depending on the amount and types of assets in your estate, you can save taxes, court costs and attorneys' fees. Maybe most importantly, you get the comfort that your loved ones won’t be burdened with unnecessary red tape and financial confusion, just when you aren’t there to help.
Every estate plan should include, at minimum, two important estate planning instruments: a durable power of attorney and a will. Your durable power of attorney helps if you become unable to manage your property during your life, by appointing someone to act on your behalf if you can’t make the necessary decisions yourself. Your will states your wishes for passing your property at death, by directing who it goes to, in what shares, and whether your beneficiary will get the property outright immediately or if someone will continue to hold the property for the beneficiary because the beneficiary is a minor, or is not going to be able to manage the property themselves, or sometimes for tax reasons.
Beyond these two basic documents, more and more Americans are using revocable trust based using revocable trust based planning instead of a regular will. Sometimes called “living trusts,” this document when properly prepared and funding can help to avoid or reduce probate and to manage your estate both during your lifetime and afterward.