Why a Good Estate Plan Is Essential

Many people never consider comprehensive estate planning. Here are a few reasons why you should.

If you have a comfortable middle-class lifestyle, you may not think you should be extremely concerned about estate planning. However, a solid estate plan will estimate the value your estate, give you control of how your assets are distributed, minimize taxes, and even help you leave the legacy you want after you are gone.

The Will
Everyone should have a will, a legal document that tells the courts how to distribute your assets upon your death. Without a will, your state will divvy up your assets without your input, typically to your closest relatives as determined by specific state rules and regulations. Wills are an essential component of any estate plan, but for more control or complex situations, more sophisticated options are available.

Benefits of a Trust
Establishing a trust within your estate plan can solve a myriad of problems. For starters, provided that the trust is set up correctly, it will not be subject to probate (the process of certifying and registering a will). Second, the trust allows you more control to provide for special situations, such as second marriages, special needs children, or protecting the rights of unmarried caregivers or partners. Third, while the assets are “owned” by the trust, you can be named as trustee and have control over the assets—and control over who gets them when you die.

Privacy Concerns
Estate planning can provide another valuable consideration: privacy. If you would prefer that the disposition of your assets at your death not become a matter of public record—as wills and probate are—you can protect those assets in a trust or re-title them during your lifetime in such a way that they pass directly to your heir at the proper time.

Expecting the Unexpected
If you want to leave substantial assets to your children, estate planning can help you anticipate unforeseen circumstances and protect bequests (assets you leave to your heirs). What if your adult child gets divorced, declares bankruptcy, or is sued? With proper planning, you can leave assets in such a way that a divorcing spouse, certain creditors, or a lawsuit cannot seize them. This may be of particular interest to you if you are leaving your child a share in a family business you spent years building.

Federal Tax Bite
Should you worry about federal estate taxes? While many believe their estates would be valued well below the $2 million federal tax benchmark (for 2006), you may be well advised to double check your numbers. If you consider that the recent housing boom may have significantly increased the value of your home(s), then add in any life insurance policies, retirement accounts, investment portfolios, business interests, and personal property (vehicles, jewelry, heirlooms and more), your assets may be significantly higher than you thought. In the event that your net worth is close to $2 million, calculating it also gives you the opportunity to gift some of your assets to your loved ones (at present, up to $12,000 per person, per year).

Please note that tax laws are constantly changing and vary by state. For the most current tax information, you should consult a CPA. For more information on estate planning, consult your CPA or financial advisor.