+ What is estate planning?
When someone passes away, his or her property must somehow pass to another person or institution. A proper estate plan involves strategies to minimize potential estate taxes and settlement costs, as well as coordinate what would happen with your home, investments, businesses, life insurance, employee benefits (such as a 401k plan), retirement assets and other property in the event of death or disability. Important, basic estate documents include revocable trusts, wills, financial powers of attorney, medical directives, living wills and beneficiary designation forms for retirement accounts and life insurance policies.
+ Why is it important to establish an estate plan?
Many individuals don’t engage in formal estate planning because they don’t think that they have “a lot of assets” or mistakenly believe that their assets will be automatically shared among their children upon their passing. If you don’t make proper legal arrangements for the management of your assets and affairs after your passing, the state’s intestacy laws will take over upon your death or incapacity. This often results in the wrong people getting your assets as well as higher estate taxes.
If you pass away without establishing an estate plan, your estate will undergo probate – a public, court-supervised proceeding. Probate can be expensive and-tie up your assets for a prolonged period before your beneficiaries receive them. Even worse, failure to outline your intentions through proper estate planning can cause family chaos as well unnecessary stress and expense.