Why do I need an estate plan?
The term “estate” may bring to mind images of huge mansions on great tracts of land, domestic servants, limousines, private jets and other Hollywood-inspired pictures of immense power and wealth. But estate planning is not just for the rich and very rich—it’s something we all need to consider.
Estate planning is more than just trying to determine who will receive your assets when you’re gone. It also involves planning your financial, legal, and family affairs for now and for your retirement years, as well as preparing for incapacity. Here are 14 factors and questions which you ought to consider as a part of estate planning:
1. What is the extent and value of my real estate and personal property (including insurance, bank accounts, and retirement benefits). Where is that property located, and whether is it community or separate property in character?
2. How will my assets be managed in the event of physical or mental disability? Will there be sufficient income to meet the family’s needs?
3. What steps should be taken to plan for the possibility that long-term nursing care would be required? What options will be available to my spouse and family? What should my family, friends, and medical care providers know about medical treatment in the event I am unable to communicate my wishes?
4. Who are the persons for whom I wish to provide? Do any of these individuals have particular medical or financial needs which need to be considered? Is any beneficiary operating under some legal, physical or mental disability or less than 18 years of age? Are any of these persons receiving government benefits which might be jeopardized by the receipt of an inheritance from my estate?
5. Are any of my beneficiaries having problems with creditors? Might they need help, or do they have trouble managing money?
6. Are any of my beneficiaries going through a divorce or likely to go through a divorce? Are any of my beneficiaries (or am I) living in a nontraditional relationship, such as a registered domestic partnership, a same sex marriage, or a long term stable meretricious relationship between a traditional or same sex couple? What effects should this have on my existing estate planning documents?
7. What arrangements should be made for any minor or dependent children?
8. What person or organizations can be trusted to manage and administer my assets? What person or organization do I want to make care decisions for me if I am unable to make them for myself? Will they be attentive enough to make sure my concerns are listened to and addressed? Will there be too much temptation for family members or acquaintances whom I ask to manage my assets? What should I do to make sure the persons assisting me with the management of my assets are held accountable for their actions and are not allowed to take advantage of me if I am vulnerable?
9. What are the likely income tax, gift tax, estate tax, and generation-skipping tax transfer tax consequences of my estate plan? What are the potential changes to these tax laws that might affect me, my spouse, and our family?
10. Are there sufficient cash and liquid assets to pay taxes, creditor’s claims, and administrative expenses and still supply sufficient funds to pay the living expenses of my spouse and other dependent beneficiaries?
11. Will I have sufficient assets to meet my anticipated financial needs in my retirement years?
12. What are the best ways to avoid spending lots of money on the preparation of legal documents now and the administration of my estate later?
13. If this is a second marriage for me, how can I make sure my children from the prior marriage are provided for without penalizing my current spouse? How can I avoid potential conflict between my current spouse and my children from a prior marriage or between my spouse’s children and me?
14. How can I provide that retirement assets such as IRAs pass to the people I want them to go to without generating taxable income sooner than may be necessary? When are trusts helpful for this purpose? What rights does my spouse have in my retirement assets?
A good estate plan should represent an individual’s decisions about these and other matters in light of their own values and priorities. This is far from an exhaustive list of considerations. You may have a number of other matters which concern you. In fact, a good estate plan should represent an individual’s decisions about these and other matters in light of their own values and priorities.
Because there are so many financial, family, and health care considerations involved, estate planning decisions often will involve financial planners and insurance professionals, accountants, health care providers and social work professionals, as well as a lawyer.