What is an Estate Plan and Why Is It Important?

What Is An Estate Plan

An estate plan is the process by which an individual or family arranges the transfer of assets to intended beneficiaries in anticipation of the asset owner’s death. The purpose of an estate plan is to put into place a smooth and efficient process for preserving the maximum amount of wealth possible for the intended beneficiaries and flexibility for the individual bestowing the assets prior to that individual’s death.

If you’re thinking about planning for the future, don’t let the term “estate planning” scare you off. Estate plans aren’t only for the rich and famous. There are numerous factors other than financial assets involved.

What’s In an Estate Plan?

Fidelity investments advises families to consider the following when determining if an estate plan is needed:

  1. the size of the estate, including real estate, cash, stocks, retirement accounts, and other financial assets;
  2. the state in which you live and its tax laws;
  3. whether a business is involved in the estate;
  4. whether children are involved;
  5. if there are special circumstances, such as blended families or families with special needs;
  6. if asset owner has philanthropic goals;
  7. if there are privacy concerns;
  8. and the life stage of the asset owner.

Regardless of the complexity of your needs, all estate plans should begin with a will or living trust. For some estate plans, a will or living trust suffices, while for others the estate plans should also include durable power of attorneys, advance health care directives, letters of intent concerning specific assets or special requests, and guardianship designations (if minor children are involved).

Why Are Estate Plans Important?

If you do not have any type of estate planning in place at the time of death, your family will most likely have to “probate” your estate. Probate is the legal process through which the state determines what happens to your estate and who will receive your assets based upon something called “intestate succession.”

Intestate succession is a fancy term for the laws used by courts to determine the order by which someone inherits your assets when there is no will involved. While generally the same nationwide, every state and the District of Columbia has its own intestate succession laws and their interpretations. What’s most important to know is that probate/intestate succession is time-consuming, potentially stressful for those involved, and that your assets get distributed in a way prescribed by the state, not necessarily the way you wanted.

The probate process can also be complicated and is usually more expensive for a family then the creation of an estate plan before death.

Got Questions? Looking for Guidance?

James Legal Group can meet with you free of charge, in a setting of your choosing, to assist you in finding the most appropriate estate planning approach to meet your needs.

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