The Essentials of Estate Planning
Whether you have a spouse and children, live alone, or are in the midst of making some milestone decisions, developing a comprehensive estate plan can make you feel at ease. Many young people think they do not need an estate plan, but having your affairs in order can bring peace of mind and set you and your family on a path for financial security and certainty.
When developing an estate plan, an individual determines how their assets will be preserved, managed, and distributed after death or in the event they become incapacitated. The plan includes making a will, setting up trusts in appropriate cases, naming an executor and beneficiaries, and designating funeral and burial wishes.
To help you understand the importance of having an estate plan, we broke down the elements of a typical plan and outlined a few scenarios that may occur if you do not have an estate plan in place:
Writing a Will
A will is a legal document that allows individuals to clearly communicate their wishes for distribution of their property upon death. A will generally includes a) designating an executor, who will carry out the provisions of the will, b) names of beneficiaries, who will inherit the person’s assets, and c) providing instructions for how and when the beneficiaries will receive the assets. If applicable, the will also appoints the guardians for any minor children.
If a will is not set in place, the law in the state where you live decides how to distribute your assets to your beneficiaries . The results of this process may not align with the results you would prefer. For example, if you wanted to leave 10% of your assets to a friend, state law would not allow that because your assets would go first to any surviving family members.
If a guardian is not named, the guardian will be determined by the court and can bring upon expensive and public court proceedings. It also risks minor children not receiving the assets in the way you intended.
Appointing an Executor
An executor is responsible for locating and overseeing all assets of the deceased. They must estimate the value of the estate, including retirement accounts, bank accounts, stocks and bonds, real estate property, jewelry, and any other valuable items.
The executor must also pay off any taxes and debt owed by the deceased from the estate’s assets. Once you choose an executor, they need to be approved by the court.
If you fail to name an executor, state law determines who handles your estate.
The property and financial affairs of a deceased person are supervised through the court process in Probate Court. It is typically required to make clear who inherits the property and to make sure valid debts and taxes are paid.
Probate is handled by the executor, who verifies in court that the will is valid, identifies the deceased person’s assets, has the assets appraised, pays debts and taxes, and distributes the remaining property as the will directs.
Without an estate plan, probate court is often a lengthy process that delays the distribution of assets, which can be expensive and time consuming. In some cases, probate can be avoided altogether with a properly established trust.
Each element of an estate plan is set in place to protect your assets for your loved ones. Without having one, there are stressful consequences and uncertain situations that may arise. If you or someone you know is interested in developing an estate plan, give Kershner Sledziewski Law a call today.