by Elizabeth Hunt, Partner
Most people have heard of estate planning, but not everyone is familiar with exactly what it means, and why it’s important to have an estate plan of your own.
To put it simply, estate planning is the process of organizing and arranging for the handling of your personal and financial affairs while you are alive and well and to prepare for the event of mental incapacity or death. An estate plan brings everything together in a way that aligns with your goals while minimizing things like transfer and income taxes as well as other costs.
Why do you need an estate plan?
If something happens and you don’t have one, your state will provide one for you. And you may not like it.
If you die without an estate plan in place many of your assets will be distributed in accordance with your state’s intestacy laws (laws that specifically govern the estates of those that don’t have a will in place). So if, say, you die in Maine with a surviving spouse and children (or parents), all of those people may be entitled to a share of your estate, perhaps leaving your spouse without enough to live on. In other cases, your assets may end up with an estranged relative. If you and your spouse both die without a will naming your desired guardian for your minor children, the probate court will appoint a guardian without your input. This could cause regrettable discord among surviving family over who ought to take care of your children and manage their assets during minority.
If you become incapacitated without having an appropriate plan in place, you will not be able to conduct your business or make decisions regarding your health and financial affairs. Rather than the trusted friend, advisor or family member you would choose, a court-appointed guardian and/or conservator will be in charge of such decisions, or choose who can act on your behalf. In addition to taking the choice of such an important fiduciary out of your hands, a guardianship or conservatorship proceeding is expensive, very personally intrusive, and public.
What does an estate plan entail?
For those wishing to remain in charge of these issues, an estate plan should thus consist at the very least of a valid will, a durable power of attorney for financial affairs, and an advance health care directive with living will.
For many people, the creation of a revocable living trust may be advisable. Depending on your unique circumstances and needs, other sophisticated techniques may be appropriate components of your estate plan. These might include asset protection trusts, life insurance trusts, charitable trusts and other types of irrevocable trusts.
Bear in mind that a will governs only “probate” assets that are held in your own name and a revocable trust governs only assets that are held by the trustee. Therefore, a complete estate plan will require a review of your retirement plan and life insurance beneficiary designations, jointly-owned property, POD accounts and other non-probate property (which do not pass under the terms of your will or trust, and which often comprise the bulk of one’s estate) to ensure that they are in alignment with your overall estate planning goals.
You likely have a good idea of what you’d like to have happen to your estate in the future. Creating an estate plan reflecting your desires (and communicating with your loved ones about it) can help ensure your wishes are honored, with minimal hassle for your surviving family. Our attorneys are here to help walk you through all the options, and answer any questions you have during the estate planning process.