by | Aug 15, 2023

Having an estate plan is incredibly important, and not just for the ultra-wealthy or elderly. Every adult should consider creating an estate plan, as it can provide peace of mind for the unknown future. In fact, there are several benefits to having an estate plan. Consider these five reasons as to why estate planning is so valuable, and how it impacts you and your beneficiaries.

  1. Ensures Your Assets are Distributed to Your Selected Beneficiaries

Estate plans can take many forms, but however your estate plan is constructed, it will allow your assets to be distributed according to your wishes. Assets include all of the property you own, such as houses, land, retirement accounts, investments, vehicles, cash, and more. Assets can be passed on to family members, loved ones, other individuals, organizations, or charities.

If you pass away without a will, it is known as dying ‘intestate.’ If you die intestate, your estate, which includes all of your assets, except those assets owned as a joint tenant or those that have a named beneficiary, is then distributed to beneficiaries as predetermined by the state in which you live. Because the state gets to determine the outcome of your estate, there’s no guarantee that the state’s distribution will reflect your own personal wishes. Therefore, having an estate plan ensures your assets are distributed to the people or organizations you intended. In this way, by designating certain assets to specific recipients, estate plans can be used to benefit your beneficiaries after you pass.

  1. Saves Time and Expense

Passing away without an estate plan makes the administration of your estate much more complicated, expensive, and time consuming for your loved ones. The intestate probate process, referenced above, is fairly slow and can be costly. Not only that, but typically, while the probate process is ongoing, the assets are frozen, meaning the state’s predetermined beneficiaries can’t access them until the process is complete, unless it’s reasonable to make an early, partial distribution. This can cause stress and uncertainty for those individuals. To avoid dying intestate, and the time and cost that comes with it, proper estate planning is crucial.

  1. Reduces Taxes

Without a proper estate plan, the beneficiaries of your assets may be saddled with tax consequences after you pass. Both the federal estate tax and state inheritance tax need to be considered when allocating your assets to others. There are a multitude of ways to reduce the tax burden on the beneficiaries of your estate, which can be tailored specifically to your needs. Ultimately, a proper estate plan allows all of your assets to be passed to and enjoyed by your loved ones or other designated beneficiaries, rather than going to the state or federal government.

  1. Prepares for Your Incapacity

Estate planning isn’t just about planning for your passing. It also includes preparing for scenarios in which you become temporarily or permanently incapacitated, and can no longer make certain kinds of decisions on your own.

A winning estate plan includes both a durable power of attorney and a power of attorney for health care. A durable power of attorney appoints a trusted relative, friend, bank trust department, or trust company to maintain your legal and financial affairs if you can't manage them independently. It continues indefinitely unless you designate otherwise. A power of attorney for health care gives a trusted individual the ability to make healthcare decisions, including end-of-life decisions, on your behalf if you are unable to do so. Both of these documents ensure the management of your financial affairs and medical care is clear, which provides much needed certainty and peace of mind for you and your loved ones.

  1. Protects Minor Children

Arguably one of the most important benefits of estate planning is that it provides an outline for the care of your minor children or dependents in the event you no longer can support them. This is usually accomplished by designating a guardian, which is an individual or individuals who you trust to care for your children should you pass or become incapacitated. Typically, guardianship is documented in a will, and is used to protect children who are under the age of majority or impaired individuals. Additionally, trusts can be created in a will that will hold the children’s inheritance for them until they reach a designated age, and name an individual to manage the trust for them.

If you fail to name a guardian, the court will then step in to determine who will take care of your children. The court’s determination may be against your wishes, which is why it’s crucial to execute an estate plan and ensure your preferences regarding the care of your children are met.

All in all, if you want to protect yourself, your children, your loved ones, and your assets, an estate plan is of the utmost importance.

This post was drafted by Faith Kowalski, a law clerk at Baylor Evnen Wolfe & Tannehill, LLP. For more information about estate planning, please call Barry Hemmerling or Gabriella Miller at 402-475-1075.