It's the start of the new year and depending on the blogs and podcasts you consume, you'll likely see a common recommendation that it's a good time to get your estate plan in order (admittedly, it's a little meta since this post is about exactly that topic). Indeed, many of the calls I get from prospective clients at this time of year are exactly that - it's on my New Year's resolution list, or my financial advisor was bugging me to get this done before year's end and now it's January and I'm trying to catch up.
To get started, it's important to understand what "estate planning" means, why you should crate an estate plan, and how to get started. And if you choose to do nothing? That's also a plan by default, but that can leave some surprises and unwanted attorney fees for your family after you're gone.
Whatever the motivator, the start of a new year is a good time to either get an estate plan drafted or to review the one you've already got in place to see if any updates are needed.
What is Estate Planning?
"Estate planning" is a generalized term for organizing your affairs to manage and distribute your assets during your lifetime and after your death. While each person's plan may be different, there are common documents that most people will use as part of their estate plan, like:
If you go online to a website that will mail-merge your information into forms, you'll likely get all or some combination of these documents. However, not everyone needs each of these documents, and it's a much better option to work with professionals to ensure you are getting the right documents that are tailored to protect your legacy.
Why Should You Create an Estate Plan?
No matter what stage of life you are in, having an estate plan allows you to be in control of your legacy and ensure that major decisions aren't just left up to a local Probate Court judge by default. Some common benefits to having an estate plan:
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Protecting Your Loved Ones: An estate plan ensures that your assets are distributed to your chosen beneficiaries, preventing potential disputes among family members. It also allows you to designate guardians for minor children and trustees to manage money for them, ensuring their care aligns with your preferences.
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Minimizing Taxes: Strategic estate planning can reduce the tax burden on your heirs. By utilizing tools like trusts and charitable donations, you can minimize estate and inheritance taxes, preserving more of your wealth for your beneficiaries.
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Avoiding Probate: A well-structured estate plan can help your estate bypass the often lengthy, costly, and public probate process, allowing for a more efficient transfer of assets to your heirs.
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Healthcare Decisions: Through documents like a living will and healthcare power of attorney, you can specify your medical preferences and designate someone to make healthcare decisions on your behalf if you're unable to do so.
Should An Estate Plan Be Your New Year's Resolution?
You're reading content from an estate planning attorney, so you know that the answer to this question is likely yes. Utilizing this as a resolution can provide you with:
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Peace of Mind: Knowing that your affairs are in order provides comfort, reducing stress for you and your family.
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Financial Security: An estate plan ensures that your assets are managed and distributed according to your wishes, providing financial security for your loved ones.
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Legacy Preservation: It allows you to leave a lasting legacy of your own design, supporting causes you care about through charitable bequests and ensuring your values are upheld.
How to Get Started
The easiest first step is to connect with an estate planning professional to get the process started. As you get ready for that first meeting, it's often good to have a general idea of how the process looks:
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Assess Your Assets: Compile a comprehensive list of your assets, including properties, investments, and personal belongings.
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Define Your Wishes: Decide how you want your assets distributed, who will care for your dependents, and who will make decisions on your behalf if necessary.
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Consult Professionals: Engage with estate planning attorneys and financial advisors to create a legally sound plan tailored to your needs.
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Draft Essential Documents: Prepare necessary documents such as wills, trusts, and powers of attorney.
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Review and Update Regularly: Life changes; ensure your estate plan reflects your current circumstances and wishes.
What If You Do Nothing?
Without an estate plan, your assets will be distributed according to state laws, which might not align with your preferences. This can lead to family disputes, increased taxes, and legal complications, causing additional stress during an already difficult time. Especially if you have children under 18, an estate plan protects them from a drawn-out court proceeding to decide where they should live after their parents are gone.
Doing nothing is technically an estate plan in itself. You are choosing to leave your legacy up to the judge in your local Probate Court, and likely requiring significant legal fees for your family to be able to navigate the probate process and get to the conclusion of your estate proceeding.
For most people, this plan by default is far from what they intend. The costs alone for an attorney to navigate a probate proceeding often far exceed the costs of creating an estate plan. Some people choose to leave that cost and headache for their family after their gone, but most prefer to get an estate plan in place and avoid the unnecessary fees and drama.
Do You Need an Estate Planning Attorney?
If you need a full estate plan, let's schedule a Legal Strategy Session online or by calling my Edina, Minnesota office at (612) 294-6982 or my New York City office at (646) 847-3560. My office will be happy to find a convenient time for us to have a phone call to review the best options and next steps for you to work with an estate planning attorney to get your plan prepared and implemented.
