Estate planning isn’t only for the rich. Without a plan in place, there will be long-lasting impacts on your loved ones, even if you don?t have an expensive home, large IRA or valuable art to pass on. Estate planning is a simple, loving act of directing where your stuff goes after your die and telling your family how you want to experience the end of your life.
Based on spending years helping families create estate plans and handling the probates to implement these plans, these are things that are not fun to think about. At the same time, it is a critical step in making sure loved ones:
- Are taken care of after you are gone.
- Know how you want to be cared for when you are no longer able to take care of yourself.
Most people would rather spend time planning a vacation, deciding what car to buy, or where to eat dinner. They do not want to think about who will get their stuff after they die. They do not want to think about how they want their end of life experience to be handled. The problem with ignoring this important task is you leave behind sad and bewildered family members to sort out the mess you left them.
Still not convinced that estate planning is not just necessary, but beneficial? Read on to discover the top 10 reasons why you need to do estate planning. This article will help you understand the benefits of estate planning and the legal hassles loved ones avoid when you give them the right tools to take care of your business.
Ten Reasons to Plan Your Estate in Texas
1. Estate Planning Ensures Your Wealth Goes to Intended Beneficiaries.
Did you know that the State of Texas has written a will for you? This will is created by the ?intestacy? statute. The language in the Texas intestacy statute is mind-boggling. Read this statute and you can see how it will result in your stuff going to unintended beneficiaries. Create an estate plan and none of this will happen. You will decide where your stuff goes.
Do you know how many people prefer to use the plan that the State of Texas will provide? If you guess zero, you are right. I have never worked with an estate planning client who wants to use the State of Texas plan. To learn what happens when you don?t have a will, read my article on Texas intestate succession.
There are 4 ways to override this statute:
- Validly executing a will
- Creating a revocable trust and transferring your assets to the trust during your life
- Owning your assets jointly with the person you want to have your assets after you die
- Providing for the disposition of your assets pursuant to a transfer on death or beneficiary designation.
Estate Planning is not just for high net worth people. It’s for everyone who own stuff that needs to be passed on!
If estate planning was once considered something that only high net worth individuals needed, that’s changed. Today, many middle-class families need to plan for when something happens to a family’s bread-winners. After all, you don?t have to be super rich to do well in the stock market or real estate. These are common ways to produce assets that you’ll want to pass on to the people you care about most.
Without an estate plan, the courts will often decide who gets your assets. This process can take years, and often gets ugly and very expensive. A court won?t know which sibling has been responsible and which one shouldn?t have free access to cash. Nor will the courts automatically rule that the surviving spouse gets everything.
2. Protect Families With Young Children Or Blended Families
Do Not Let A Judge Decide Who will care of your minor childrenNobody plans to die before their children are adults. It does happen. More often than most people want to think about. Make sure you stop a judge from deciding these issues with a will. In your will, until the children are adults, you want to name:
- A guardian to take care of the children.
- A trustee to mange the money your children receive.
Without a will where you name the guardian, the judge steps in. I will be the judge deciding will raise your children. It will probably be someone you would not choose.
Do Not Let A Judge Decide Who manages the money for your minor children
Young children or children with poor money management sense need help. A will with a trust and a trusted person to manage the trust assets is essential. You pick the person for this important job who will:
- Use the assets in the best interest of the children.
- Not waste the assets on frivolous expenditures.
- Release the money left in the trust when the children reach the age you select.
Yours, Mine & Ours! Protect Everyone in Blended Families
Second marriages can be wonderful things — exciting, fulfilling, and rarely dull! That said, blended families have their own special challenges in estate planning. Both of you:
- May have children from previous relationships and children together.
- You each may have property and other assets you’ve brought to the relationship.
- If you’re like most people, you want to provide for your spouse’s needs, while ensuring that your property (or much of it) ultimately will go to your children.
Providing for everyone you love can get tricky But not impossible
Both of you need an estate plan that fits you both. Without an estate plan, you have no control over where your stuff goes. Relying on your spouse and children to “work it out” is not a plan.?Estate planning is a simple & loving act of
- Directing where your stuff goes after your die
- Telling your family how you want to experience the end of your life.
3. Avoid The Time And Costs Of Probate
Assets you own in your individual name at the time of your death are subject to probate. Probate can be time-consuming and may involve significant costs. Executing a simple will does not avoid probate but there are several ways to do so:
- Create a revocable trust and transferring your assets to the trust during your life.
- Own your assets jointly.
- Provide for the disposition of your assets pursuant to a transfer on death or beneficiary designation.
If your goal is to avoid probate but still retain control of where your stuff goes, you have options. For more information on how probate works in Texas, read my post on how to probate an estate in Texas.
4. Name Your Personal Representative
If you die with any assets owned in your individual name, these assets must be administered under the direction of the probate court (?probated?) before they can pass to the beneficiaries. By executing a will, you can specify whom you would like to serve as your ?personal representative? to handle your probate estate. The personal representative has a significant amount of responsibility, from paying your debts and expenses, to deciding how your specific items of property will be allocated among your beneficiaries. The personal representative also has the discretion to liquidate your assets, and distribute the cash proceeds, or distribute your assets in-kind to the beneficiaries.
It is important to select the right person to be your personal representative. If you want more information to help you select the right person, read my post on 4 things that must be in a Texas will.
5. Make Sure Your Assets Stay In Your Family If Your Spouse Remarries
If your spouse survives you and your estate plan leaves everything to your spouse, what happens to the assets when they die? Your spouse may leave the assets to the new spouse. If you want your assets going to your family after your spouse dies, set up a trust or make specific gifts in your will.
6. Protect Your Assets From Future Creditors
If you have potential creditor problems or work in an industry that is often subject to litigation, then there are several options available to isolate your assets from future creditors. Trusts are a good option and can protect against claims to your assets.
7. Estate Planning Spares Heirs A Big Tax Bite
Estate planning is all about protecting your loved ones. A big protection is keeping the IRS away. A big goal in estate planning is transferring assets to heirs with the smallest tax burden possible. Even with just a little bit of estate planning, you will reduce or eliminate taxes. Without a plan, the amount your heirs will owe Uncle Sam could be quite a lot.
8. Eliminates Family Messes When You Are Not Available
We?ve all heard those horror stories that when someone with money dies, the warring between family members begins.
- One sibling may think they deserves more than another
- One sibling may think that they should be in charge of the finances even though they are notorious for racking up debt.
- Squabbling can get ugly and end up in court, with family members pitted against each other.
These kinds of messes only happen when there has been no estate planning. With an estate plan, you
- choose who controls your finances and assets if you become mentally incapacitated or after you die
- Prevent any family strife
- Ensure your assets are handled the way want them to be.
Fights about the terms of your will are terrible. But my tips on how to avoid a will contest in Texas can help your loved ones avoid the headaches.
9. Avoid A Guardianship Upon Incapacity
If you do not have a valid durable power of attorney for financial decisions, if you become incapacitated then no one can take care of your business. If this happens, then an extremely expensive and time-consuming court process must be undertaken to administer a guardianship on your behalf. Read my blog post on things to know about Texas guardianship.
Read my post on other alternatives to Texas guardianships
10. Direct Your Family And Physicians How To Make Health Care Decisions
In the event you became incapacitated, a doctor will be responsible for making medical decisions on your behalf. If you execute a medical directive (a/k/a living will) and a medical power of attorney, then you pick an ?agent?, someone you trust to honor your choices, to make these decisions for you. In a medical directive you tell your agent and doctor exactly how you want the end of your life handled. Period!
The Bottom Line
I often get the question: “Why do I need to do estate planning?” Simply put, without an estate plan:
- Assets are not protected.
- Loved ones are not protected.
- Heirs face huge tax burdens.
- A judge decides who get your assets.
- Who gets your children is decided by the judge.
- The family faces a big & expensive fight on who gets your stuff.
- The end of life experience will not be how you want it.