Few people are comfortable dealing with questions like “what happens to my assets and my family when I am no longer here?” It is no surprise that estate planning is often an avoided part of financial planning. In fact, nearly half of Americans over the age of 55 do not have a will, and only 18% of them have what financial planners call the essentials: a Last Will and Testament, Health Care Directives, a Medical Power of Attorney, and a Statutory Durable Power of Attorney.
At the very least, anyone with assets should have a Last Will and Testament; but estate planning goes further in protecting your assets. It makes sure your assets are distributed the way you want them to be and go to the people you want.
An Estate Plan Is Not “Just” A Last Will And Testament
Wills are legally binding documents that deal with asset distribution after death, but estate plans go much further than just distributing your assets. An estate plan arranges distribution in a way that maximizes benefits to your beneficiaries by minimizing taxes and expenses. An estate plan typically includes:
- A Last Will and Testament
- A Trust
- A Medical Power of Attorney
- A Statutory Durable Power of Attorney
- A Directive to Physicians
- A HIPAA Authorization
- A Business Succession Plan
You may think estate planning is for people who have more assets than you, but as these five points make clear, it is a smart choice for everyone, regardless of your age or net worth.
1) It Protects You And Your Assets. Estate planning is not just the distribution of assets to your beneficiaries. It also protects you if you become incapacitated or can’t make decisions for yourself. You can designate an agent in your Statutory Durable Power of Attorney and your Medical Power of Attorney who would make financial and medical decisions on your behalf.
2) It Protects Beneficiaries. Estate plans can protect young or financially inexperienced beneficiaries but are also helpful in protecting assets from frivolous lawsuits (i.e. Divorce). A plan also covers issues like who will raise your minor children if you die or become incapacitated, what assets are distributed to children from a previous marriage, and how children with special needs can remain eligible for government benefits while still receiving their inheritance.
3) It Spares Heirs A Big Tax Bite. Even if your estate is below the federal estate tax exclusion rate, which for 2020 is $11.5 million per individual, there are other issues to consider. Seventeen states and the District of Columbia currently impose either an inheritance or estate tax, or both. Texas does not have either one, but other states’ inheritance taxes may apply if you live in Texas and inherit money from a state that does. Texas also does not have a transfer tax, but an estate planning attorney can help explain things like the federal generation-skipping transfer tax exemption and how it might apply to you.
4) It Helps Meet Philanthropic Goals. Legacy planning is a common part of the estate planning process and can help shape the way you’re remembered. Some people choose to leave money and other assets to charities or educational institutions. Others create family foundations or set up charitable trusts. You can also establish a charitable remainder trust (CRT) which gives beneficiaries a stream of income while you’re alive with the remainder going to a favorite charity after death.
5) Prevents Family Discord. Many estate planning attorneys will attest to the fact that one of the biggest problems they deal with regarding estate plans is family conflict. It concerns the people setting up a plan, too, who says preserving family relationships after they’re gone is as important to them as preserving future generations’ wealth. An estate plan can make your wishes clear and hopefully keep peace within the family. It can be particularly helpful when dealing with business succession.
The Best Time To Plan Your Estate
If you want your loved ones and your assets protected, now is the time to talk to an attorney who specializes in estate planning. We at Hegwood Law Group are here to assist you in executing the estate plan that is best for you and your family. Peace of mind for you and your loved ones is our ultimate goal for you, and that begins with a tailored plan to preserve your legacy.
Contact us at (281) 885-8826 to begin protecting your loved ones today.