Question By: Estate planning is the process of anticipating and arranging for the management and dispersal of your estate during your life, as well as at and after death, while minimizing tax burden and hassle on your surviving family members and other beneficiaries. A will is part of an estate plan. Depending on the complexity of the situation, an estate planner might use other tools such as trusts, pass-through entities and/or life insurance to accomplish your estate planning goals.
Some of the most important reasons for estate planning are to:
1. Pass property to the intended beneficiaries. For example, let's say John Doe had no living relatives, yet he enjoyed a wonderful life thanks to the pastor and kind friends at his church. Before death, he verbally told his pastor that he would donate all of his estate to the church. But unfortunately, he did not have a valid will. Without a will or properly documented estate plan, state law will be used to determine who gets the assets, which most likely will not be the church.
2. Alleviate the burdens of surviving family members. Imagine that on top of the emotional turmoil a death in the family causes, your loved ones have to administer your estate without clear instruction. Many parents think that when they pass away, kids will just divide everything equally and figure things out. In reality, when a person passes, many issues (both foreseeable and unforeseeable) can arise among family members, friends, and other interested parties. It is not unusual that an estate is significantly drained by legal fees due to these conflicts. The only way to avoid these problems is to have a solid estate plan in place before death. A carefully prepared estate plan is the best love letter you can pass down.
3. Protect the estate assets from unintended recipients. Divorce is a prevalent issue in estates, as is beneficiaries who may have debt issues. Without a proper estate plan, the assets could be transferred to people or organizations other than who the deceased might have wanted. All or a significant portion of the assets of the deceased could pass to an ex-spouse, for example, or creditors.
4. Deciding who will raise your children. This is particularly relevant to those with younger children. Without a will, a terrible accident in which both parents die will leave the fate of their children most likely for a court to decide.
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