You have undoubtedly heard time and time again how important it is to have an estate plan in place – but has anyone bothered to explain why it is so important? Over half of all Americans do not have an estate plan in place despite admitting that they too have been told how important it is to have one. Not surprisingly, one of the most common explanations given for the apparent disparity is that people are unsure why they need a plan. A well thought out and comprehensive estate plan can fulfill a wide variety of inter-connected needs and goals. Understanding what an estate plan can do for you should help motivate you to get started on your plan if you have yet to do so.
The Benefits of Having an Estate Plan
You don’t have to have a valuable estate to care what happens to the assets you do own. In fact, it is often the assets that have no real monetary value that mean the most to us. If you were to die unexpectedly without an estate plan in place, you would leave behind an intestate estate. That means the state intestate succession laws would determine what happens to those assets. Family heirlooms might be given to someone who would not cherish them as you have. Promises to friends and extended family members would not be honored. You even forfeit the right to decide who handles the administration of your estate if you die intestate. Creating an estate plan ensures that your estate is distributed according to your wishes, not according to state laws. You may also have very clear wishes with regard to the medical care you wish to receive, or refuse, if you are suffering a terminal illness or condition as well as very strong preferences with regard to how your body is handled after you are gone and about the type of service held in your honor following your death. To ensure that those wishes are honored you need to have an estate plan in place that legally obligates loved ones to abide by and honor your wishes.
If you are a parent, your estate plan can also protect your child’s inheritance. You undoubtedly want your child to be well cared for in the event something happens to you. A minor child, however, cannot inherit directly from your estate. To ensure that assets intended for the care and maintenance of your child are protected, you need an estate plan that includes a trust and other estate planning tools that will help protect your child’s inheritance. Absent a plan, assets you intended for your child could be squandered or mismanaged.
Planning for the possibility of your own incapacity is just as important as planning for your own mortality. You may be surprised to learn that you stand about a one in five chance of suffering a period of incapacity lasting five months or more before you reach retirement age. The odds of becoming incapacitated will also increase as you age, making an incapacity planning component within your estate plan a crucial addition. Without one, you have no control over who will make health care decisions for you nor who will take over control of your assets and finances in the event you do become incapacitated.
Your estate plan also helps protect the assets you acquire over your lifetime. Divorce, bankruptcy, and estate taxes are well-known threats to the estate assets you acquire over your lifetime; however, threats such as in-laws, long-term care expenses, and your own beneficiaries can also diminish the value of your estate if you are not careful. Your retirement nest egg could be lost, for example, if you, or a spouse, need long-term care and you need to help pay for that care. Your estate plan can help protect your estate assets by incorporating asset protection strategies into the plan.
These are but a few of the numerous and varied benefits of having an estate plan in place. The ways in which your estate plan can benefit you and your life are as unique as you are.
Contact a California Estate Planning Attorney
For more information, please download our FREE estate planning worksheet. If you have additional questions or concerns relating to estate planning in California, be sure to consult with an experienced California estate planning attorney. Contact the Collins Law Firm by calling (310) 677-9787 to register for one of our FREE estate planning workshops.