I am often asked why a person who is young without dependents or has moderate assets should have an estate plan. Isn’t it something a wealthy person does to distribute their large assets and save estate tax?
My answer is that everyone who is an independent and responsible adult needs a plan in place for the times of crisis. With an estate plan, you design the guideline to instruct how to take care of your belongings: your family, your assets, and your own body and privacy, when you are not able to make decisions for yourself anymore. Also, it is your last opportunity to tell the world what your life was about.
When you don’t have an estate plan (for various reasons you might have), you are giving up freedom and power to determine your own affairs. You might not care about what will happen after you are already gone. However, you don’t simply disappear from the world after death. You will still be remembered by loved ones, and there will be traces of your life recorded everywhere, often existing forever in this digital era. So, it is critical that your after-death life continues to be something you like.
Here are some of what could happen when you give up the power to choose yourself after death.
- Your state court will open the case called “probate” and decide what to do about your properties. Probate is basically “a lawsuit you file against yourself, for the benefit of your creditors, using your own money after you die.” The court will gather all your properties, and pay your creditors, and distribute the remaining to family members in the order the court decides. The process will cost a lot of money (3-10% of your total probatable asset)) and take a long time (12-18 months) until your family can get a hold of your properties.
- Anyone who is entitled to a share of the estate (including your creditors or your estranged family members) can apply to be a personal representative to distribute your properties under the probate.
- All information about your properties and distributions will be accessible to the public. Your neighbors can find out about what you used to own. Any predator can find out how much your vulnerable spouse and children inherited and try to get a hand on the inheritance.
- Your family members might have difficult time to access your photos and posts in facebook which are unique and touching memorabilia about your life.
- For parents of minor children or individuals with special needs When both parents die, a child will be taken by a state’s protective services and put in foster care until a relative is located. Your child’s well-being is not best left in the hands of an state foster care system. A court will consider various choices for guardianship of the child, but it might not be your ideal choice. For example, your in-law might look like a perfect candidate to a judge, but you might not want her to raise your kids with a different religious or educational philosophy. To start a process of naming legal guardians for your kids for free, Go HERE.
- For business owners Without proper succession planning or operating agreement, your estate becomes the new owner and will liquidate business assets to pay off debts and distribute in accordance with your will or state law. Your family loses the opportunity to continue your hard work and benefit from it. And you lose an opportunity to carry on your unique contribution to the world through your creation.
A good estate plan is carefully designed to avoid these situations in the event of death and save surviving family members from court intervention, family drama and unnecessary expenses.
However, estate planning also has lifetime benefits.
The planning is often combined with asset protection, tax, and business planning you can immediately benefit from. Planning beyond one generation can provide strategies that are not easily available when you only consider your own lifetime. For example, you can create a wealth creation trust for your children that keep assets safe from creditors, divorce and lawsuit.
In addition, you gain the awareness that your life is not over when you pass away. By taking care of your loved ones and others in the community through estate planning, you can see your life in a broader perspective. In the process of estate planning, you ask questions like: how will my actions impact the world after I am gone?, what is my legacy? When you have a chance to consider these questions and answer them, your life will reflect your answers.
So, I like calling estate planning “life planning.” I think it will help anyone who wants to create long lasting success and happiness in life. Everyone is creating own unique history.
I want to start a conversation with you about making the best out of life and passing on its legacy through estate planning.
If you would like to have a private Family Wealth Planning session to cover these items and identify what you want to ensure if something happens to you, email or call us to schedule the session.