Before you begin the estate planning process, you should first understand what estate planning is and what you can accomplish with it. Estate planning is the process by which an individual or a family arranges the transfer of assets in advance of death. Typically an estate plan attempts to preserve as much wealth as possible for the beneficiaries included in the estate plan. A complete estate plan, can do more than just plan for how your assets are handled when you pass. Estate planning can also allow you to plan for the care of others if you or a spouse should pass prior to your children reaching adulthood. Additionally, estate planning allows you to define the type of care you would like to receive ahead of time in case a situation arises where you are unable to communicate those wishes for yourself.
An overview of some of the benefits of estate planning or having an estate plan include:
- The minimization of taxes, court costs, and legal fees
- The naming of a guardian for the care of any non-adult children or children with special needs
- Instructions for your care and financial affairs, should you become incapacitated before death
- The possibility of avoiding probate
- The ability to keep your estate matters private as opposed to publicly assessable
- The ability to choose who will handle your estate affairs when you pass
- Specifying how and to whom your assets will be distributed
Generally, when a person passes without a will or trust, their money and property are distributed according to laws of the state that they resided in. This court process is referred to as probate. The state will determine who gets the property based on their relationship to the decedent (person who passed). Some property, such as insurance policy proceeds, joint bank accounts and retirement accounts (such as IRAs and 401Ks) may be distributed to the person you designated as the beneficiary of that specific account. In the case that it is a joint account, the other person on the account with you is typically granted full control over that account and the balance of the assets held within it when you pass.
One way you can control the distribution of your property after death is by utilizing a will. Even though a will can provide for information on how to distribute your assets, a named executor will likely still need to go through a probate court process to distribute your property. If you would like to avoid probate, speaking to an estate planning attorney about creating a living trust may be your best option.