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What is Estate Planning, Anyway? (And Why Is It So Important?)
In the simplest possible terms, estate planning is the process by which you ensure your assets and health are well-managed in the event of incapacitation or death. Everyone, regardless of age, condition, or wealth, needs an estate plan because every one of us will one day pass on. And while it is true that executing an estate plan comes at a cost, it is almost always the case that not having one is costlier, still. After all, among the many things an estate plan accomplishes is making sure your assets are distributed to your heirs without first enduring a needlessly complex probate court procedure—an often expensive and distressing experience. Additionally, with your own plan in place, you get to name exactly who you want to get your assets, ie. your beneficiaries, instead of the Court determining your heirs and your assets necessarily going down your bloodline. Money is not the only thing an estate plan saves you, though; if well-designed, an estate plan also saves you (and your family) from irreparable conflict and taxing emotional labor.
A basic estate plan includes a medical power of attorney, a directive, a durable financial power of attorney and a Will. Together, these documents guarantee you receive quality medical attention that aligns with your values even if you suffer an injury so severe that you cannot advocate for yourself; they also ensure that should you be so injured, critical financial transactions such as mortgage and credit card payments are taken care; and lastly, in the event of your death, they make sure your assets are distributed according to your wishes. All of these outcomes have important ripple effects.
By organizing who will receive your assets and how they will be passed on, an estate plan protects your loved ones in a number of ways. Those who are financially vulnerable or too young to responsibly manage a windfall of cash, for instance, are protected by the mechanisms an estate plan provides for determining when an inheritance will be received and under what conditions. If you have minor children, an estate plan also offers a means by which guardianship designations can be made and your children’s future financial security guaranteed. Lastly, an estate plan also protects your family from losing a significant portion of your life’s work to taxes.
As mentioned above, estate planning is not all about money, though. By providing a clear (and legally binding) explanation of how you would like your assets to be distributed, you save your loved ones the strife and potential conflict of seeing such decisions mediated by probate. This is especially true if in organizing your estate, you address the sensitive steps inherent in the process with your family. What’s more, because probate court, itself, is trying (and costly) no matter how clear your Will, an estate plan can also protect your family by providing the option of seeing assets distributed through a trust or other will-alternative vehicles and thereby removing the need for probate altogether.
By not only protecting your assets, but your health, too, an estate plan further relieves you and your loved ones of stress by providing the peace of mind of knowing that your medical care will be both high-quality and in adherence to your wishes. Additionally, an estate plan provides tools for ensuring you have access to long-term care should you ever need it and in so doing, takes another weight off both yours and your loved ones’ shoulders.
While all estate plans will include a medical power of attorney, a directive, a financial durable power of attorney and a Will (at a minimum), the formulation of each of these will be as different as each individual’s values and financial position. Accordingly, it is important to work with an experienced estate planning attorney to design a plan that suits your personal needs and goals.