Why Bother With Estate Planning?
When talking with people about estate planning, a common refrain is “Why should I go through all the time, energy and money to set up an estate plan? Only rich people or elderly people need estate planning.”
While it is true that proper estate planning is particularly helpful for wealthy people and the elderly, the advantages of estate planning are not limited to them. People of any age or financial circumstances will benefit from setting up a sound estate plan.
Here are a few examples of how estate planning can help you, regardless of your age or net worth:
- Planning for someone to handle your affairs:
As part of your estate plan, you can nominate people to handle your financial affairs, if you become unable to manage your own finances. You can also nominate people to be in charge of your estate after your death and to manage your assets for children or other family members who may be too young to inherit from you. Often the people you nominate are family members or close friends, but may also be professionals or financial institutions.
- Planning for care of minor children:
As part of your estate plan, you can specify who should care for your children until they reach age 18. You can also specify who should manage your children’s finances until they are older.
- Planning for care of disabled family members or friends:
We often have friends and family members who suffer from a disability, whether it be a physical, mental, or emotional disability, or even gambling or substance abuse problems. Dealing with estate planning for disabled persons is complicated. In some situations, the disabled person is unable to deal with their finances and require assistance dealing with an inheritance. In other situations, the disabled person would be disqualified from government benefits or assistance if they inherit from you. Setting up a sound estate plan can help to ensure that your disabled loved ones are cared for, without burdening them or disqualifying them from any assistance they may receive.
- Directing the distribution of your assets after your death:
One of the main aspects of estate planning is specifying what happens with your assets after your death. A very simple estate plan would be to leave all of your assets to your spouse or your children. However, in some situations, people want to leave specific items to specific people, make donations to certain charities, or leave cash gifts to friends or family members. Sound estate planning will encompass each of those goals.
- Specifying the disposition of your remains:
An aspect of planning that is frequently overlooked is what should happen with your physical remains after your death. You can include your wishes about funeral or cremation arrangements in your estate plan, including nominating a person to handle your arrangements for you.
- Avoidance of probate proceedings:
Probate is a court-supervised legal process for transferring ownership of your assets to your heirs after your death. Unfortunately, the probate process can be both frustratingly slow and expensive. With proper estate planning, it is possible to avoid the need for probate proceedings, such as by using a trust as a part of your estate plan.
- Waiver of personal representative’s bond:
If probate proceedings are required for your estate, your personal representative (aka executor) is generally required to purchase a bond to reimburse your heirs if your personal representative mismanages or steals your assets. Unfortunately, probate bonds can be expensive and create a burden for your personal representative. If you trust your personal representative, you can waive the bond requirement in advance as part of your estate plan.
- Planning for estate taxes:
Depending on the value of your assets at the time of your death, your estate may be liable for federal or state estate taxes, which would reduce the amount of assets available to pass on to your heirs. Depending on your circumstances, proper estate planning may be able to reduce or even eliminate that potential estate tax liability.
Admittedly, estate planning is not absolutely required. The legal system has procedures in place for dealing with those people who did not set up an estate plan. For example, if you do not set up an estate plan that lays out the distribution of your assets to your intended heirs, Oregon has a set of rules for “intestate succession” that create a sort of default hierarchy of family members who will inherit from you. Generally, your closest surviving family members will inherit your assets (your spouse, followed by your children, followed by your parents, and so on). However, if you are not satisfied with this default distribution of your assets, or if you want to take advantage of any of the benefits mentioned above, then you need to take the time to set up your estate plan.
Estate planning seems to always be on the back burner. It seems to always be the last item on people’s “To Do” lists. However, once you begin to consider all of the advantages that setting up an estate plan can bring, it becomes clear that you should find the time for your estate planning.