Why have an estate plan?

By Executor's Resource, Inc.

A recent study showed that in today's economy, more and more people see estate planning as "discretionary" - something that can be put off until times are better. Unfortunately, disaster doesn't know the difference between a bullish or bearish stock market, or an employed versus unemployed person. Simply put, the benefits of having a current, up-to-date estate plan far outweigh what happens if you don’t.

Let's start with addressing what an estate plan does. An estate plan helps to see that your loved ones are provided for after your death in accordance with your preferences and instructions. People create estate plans for a variety of reasons.

Some people have a strong desire to avoid probate. Remember, probate is simply the legal process whereby a court appointed person – typically a close family member or friend, but sometimes an attorney or other professional – identifies all of your assets and liabilities and their value, pays your final bills, and distributes what’s left your assets to your heirs according to law.

In Colorado where Executor's Resource is headquartered, it’s actually quite a simple process. In some other states it can be a little more complex.

If you want to know what strategies will help you better manage probate, a qualified estate planning attorney can assist you. This could include making sure your beneficiary designations on your financial accounts and insurance policies are completed properly to even considering various types of trusts. For more information, read our prior posting called Probate 411.

Some people create an estate plan to make sure that their assets will be transferred in a tax efficient manner. This year, there is no federal estate tax; however, unless Congress acts, next year the federal estate tax will apply for estates with over $1 million in assets. 

Historically, only a small percentage of the population has paid federal estate tax, but this will be something for us all to keep our eye on. For those of you who own a house, have a 401(k) plan, modest insurance coverage and personal property, it may not be hard to surpass $1 million. As an important note, the residents of 15 or so states also may owe a state estate tax.

Others who may be worried about creditors or the privacy of their estate settlement might find value in having a trust. Again, you'll want to seek qualified legal assistance in creating an advanced technique like a trust.

Most importantly, an estate plan helps to ensure that your wishes and instructions are carried out in the manner you specify, that family harmony is maintained, and that your loved one's burden in settling your affairs is minimized in their time of grief.

Simply put, your death will be much easier on your family if you have a plan. In our next posting, we'll discuss the four components of a good estate plan.