What You Should Know About Estate Planning
1. What is Estate Planning?
Estate planning is the process of organizing one’s finances in a manner that best assures their proper administration after death. A comprehensive estate plan will also anticipate and arrange for a desired level of medical care in the event of an extended incapacity or imminent death.
Estate planning involves the use of beneficiary designations, wills, living trusts, powers of attorney, and living will declarations. Advanced estate planning techniques often include the use of irrevocable trusts, marital agreements, and business entities.
2. What are the objectives of Estate Planning?
The objectives of estate planning, in order of usual priority, are:
3. Is Estate Planning only for the rich?
Certainly not! While estate tax avoidance strategies may be irrelevant to persons of modest wealth, there are many reasons for everyone to prepare a comprehensive estate plan.
Special situations that warrant estate planning may arise that are entirely unrelated to the size of someone’s bank account. For example, (1) children from a prior marriage, (2) substantial debt, (3) creditor protection issues, (4) special needs children, (5) transfer of business control, or (6) irresponsible heirs. In addition, every person should have a financial power of attorney and health care power of attorney because they help avoid unnecessary court involvement in the event of extended incapacity.
4. Is an attorney necessary?
Yes, an estate planning attorney. Perhaps you are tempted to do your own estate plan as a do-it-yourself project. You could buy some software that purports to produce “attorney-drafted documents good in all 50 states.” You might even follow its directions carefully and produce a decent result. However, use of a computer program will be successful only if (1) the program supplies the options you need, and (2) you understand the options well enough to choose the best one (or notice that the best one is missing). If you are not familiar with the methodology and mathematical processes in formulating an estate plan, there will be no way to know if the software produced a realistic and appropriate result. Generally, the saying, “He who has self for an attorney has a fool for a client” applies in the area of estate planning.
5. Why not use Legal Zoom or Suze Orman forms?
There is no substitute for the benefit of interacting with someone who is familiar with local laws and customs. An estate attorney can tailor an estate plan specific to your needs.
About the Author
Thomas J. Bouman provides legal counsel in the areas of estate planning, estate settlement, and asset protection. He brings a highly systematic approach to the practice of law, which is critically important when wading through the complex, and often bizarre, legal requirements associated with estate and trust law. Mr. Bouman is author of the Arizona Estate Administration Answer Book and a prominent member of Wealth Counsel, LLC, the nation’s premiere organization of estate planning attorneys.
Estate planning is the process of organizing one’s finances in a manner that best assures their proper administration after death. A comprehensive estate plan will also anticipate and arrange for a desired level of medical care in the event of an extended incapacity or imminent death.
Estate planning involves the use of beneficiary designations, wills, living trusts, powers of attorney, and living will declarations. Advanced estate planning techniques often include the use of irrevocable trusts, marital agreements, and business entities.
2. What are the objectives of Estate Planning?
The objectives of estate planning, in order of usual priority, are:
- Fulfill parenting responsibilities. You would never leave young children without a trusted babysitter and a customized set of instructions. So why risk leaving them for good without planning ahead? If you don’t designate a legal guardian, then a judge will be assigned to appoint one for you.
- Get organized. All things considered, an estate plan is usually designed to avoid the court-supervised probate process after death. Even with modern probate rules, a simple probate will trigger unnecessary legal fees, invite disgruntled heirs to contest the will, and possibly delay the distribution of an estate. An estate plan should also include a mechanism to avoid the need for a court-appointed conservator or guardian in the event of extended incapacity.
- Promote self control. Even financially savvy heirs can have trouble handling a sudden windfall, so imagine the damage that can be done by inexperienced, immature, or emotionally unstable heirs. In your estate plan, you can direct when, how and for what purpose your assets should be distributed. Instead of outright distribution, you might prefer to leave inheritance in a manner that you know will help your heirs rather than hurt them.
- Model good stewardship. Estate planning includes a wide variety of techniques to reduce, defer and eliminate taxes. Of course there are techniques to avoid estate taxes upon death. However, did you know there are techniques to reduce the impact of income, capital gains, and estate taxes for your heirs? These are benefits you can give to them, which they cannot obtain by themselves.
- Asset protection. The demand for legal strategies to protect personal assets has never been higher. Always an important consideration for business owners and professionals in high risk occupations, today’s litigious society means that more people want to implement legal strategies to protect their personal wealth. Estate planning offers a wide range of asset protection tools which can be incorporated into the overall plan.
3. Is Estate Planning only for the rich?
Certainly not! While estate tax avoidance strategies may be irrelevant to persons of modest wealth, there are many reasons for everyone to prepare a comprehensive estate plan.
Special situations that warrant estate planning may arise that are entirely unrelated to the size of someone’s bank account. For example, (1) children from a prior marriage, (2) substantial debt, (3) creditor protection issues, (4) special needs children, (5) transfer of business control, or (6) irresponsible heirs. In addition, every person should have a financial power of attorney and health care power of attorney because they help avoid unnecessary court involvement in the event of extended incapacity.
4. Is an attorney necessary?
Yes, an estate planning attorney. Perhaps you are tempted to do your own estate plan as a do-it-yourself project. You could buy some software that purports to produce “attorney-drafted documents good in all 50 states.” You might even follow its directions carefully and produce a decent result. However, use of a computer program will be successful only if (1) the program supplies the options you need, and (2) you understand the options well enough to choose the best one (or notice that the best one is missing). If you are not familiar with the methodology and mathematical processes in formulating an estate plan, there will be no way to know if the software produced a realistic and appropriate result. Generally, the saying, “He who has self for an attorney has a fool for a client” applies in the area of estate planning.
5. Why not use Legal Zoom or Suze Orman forms?
There is no substitute for the benefit of interacting with someone who is familiar with local laws and customs. An estate attorney can tailor an estate plan specific to your needs.
About the Author
Thomas J. Bouman provides legal counsel in the areas of estate planning, estate settlement, and asset protection. He brings a highly systematic approach to the practice of law, which is critically important when wading through the complex, and often bizarre, legal requirements associated with estate and trust law. Mr. Bouman is author of the Arizona Estate Administration Answer Book and a prominent member of Wealth Counsel, LLC, the nation’s premiere organization of estate planning attorneys.