Many consumers have misconceptions about the full scope of estate planning. While some believe that a will is all that is involved with an estate plan, the truth is estate planning can be far-reaching and make plans for everything from assets to funeral arrangements to minor children to adult children with disabilities. Estate planning can also be an effective tool for minimizing or avoiding taxes for beneficiaries.
Almost everyone can benefit from some type of estate planning, especially if there are children, real estate, or assets involved. Unfortunately, a Gallup survey reveals that only 44% of Americans have a living trust or will. Think you don’t need estate planning? Here’s what it can involve.
Will or Living Trust
Every estate plan starts with a living trust or will. A will does not avoid the probate process after death, but it does make your instructions clear. A living trust, on the other hand, can skip the probate process, prevent the court from controlling your assets if a beneficiary is incapable, and bring all assets under a single plan. Assets can even stay in a living trust after your death and remain managed by the trust until beneficiaries reach the age at which you want them to inherit.
When someone dies, it’s common for family members to struggle to find important financial documents, titles, insurance policies, and beneficiary designations. Estate planning can ensure these important documents are organized and conveniently available to beneficiaries.
A strong estate plan can be used to legally avoid or minimize taxes and the costs associated with probate. There are many strategies an estate attorney can recommend, including lifetime gifts to children (capped at $24,000 per year per person when a couple both engage in gifting), irrevocable life insurance trusts, and private annuities.
Planning for Minor Children
If something happens to you, who will care for your minor children? This is one of the most crucial questions an estate plan can answer. With estate planning, you can designate a guardian to raise your children if you and the other parent cannot. Otherwise, the court will decide your child’s guardian. Parents can also use estate planning to determine how assets will be transferred to a child. Many parents choose to create a minor’s trust and name a trustee to manage the funds until the child reaches a certain age, such as 30.
Special Needs Trust
Estate planning can be crucial to ensure children with special needs have the care and protection they need after they reach adulthood. A special needs trust allows someone with a physical or mental disability or chronic illness to benefit from an unlimited amount of money held in a trust.
Advanced Medical Directives
Finally, estate planning can also be used to specify the type of care you want to receive while you are still alive. Advance care directives can be used to make your wishes known in many situations such as:
- Whether you want to donate organs
- Whether you want pain treatment or palliative care
- Whether you want intravenous fluid and tube feeding if you are unable to eat and drink
- Whether you want a Do Not Resuscitate order
- Whether you want the use of equipment like ventilators or dialysis
Virtually everyone has an estate, large or small. An estate plan is more than just planning for how assets will be distributed; it can be used to designate a child’s guardian, make your medical wishes known, or plan for the future of a child with special needs. If you do not yet have an estate plan in place, contact Scottsdale Arizona Estate Planning Attorneys that can help you prepare the necessary documents to plan for the future.
Thanks to our friends and contributors from Hildebrand Law for their insight into Estate planning expertise.