This is an article from Kulas Law Group (www.kulaslaw.com) in Port St. Lucie, Florida, that we thought others may find helpful.
Estate planning is something that everyone needs to engage in, yet most people know very little about. Over half of all Americans do not have an estate plan in place despite being aware of the need to have one. Although basic estate planning concepts are easy to understand, many of the strategies and tools used in a more complex estate plan can be difficult to understand at first. Just trying to decide which of those concepts and strategies to use in your plan can be challenging for the uninitiated. Learning more about your own estate plan and it’s individual components is a great way to make the whole process less intimidating. For example, how do estate planning lawyers decide what components should be included in a plan?
The Importance of Comprehensive Estate Planning
If you are like most people, your initial estate plan will likely include your Last Will and Testament – and nothing more. A Will frequently serves as the foundation of an estate plan because it can accomplish the distribution of estate assets in a simple and straightforward manner. When you are young and without a large estate or family to consider, your primary estate planning concern is usually to avoid dying intestate (without a Will) because that would result in the State deciding how your assets are distributed. Over time, your estate and your family will grow and change, generating additional estate planning concerns that will require a more comprehensive estate plan. This is one of the many reasons it is so important to review and revise your estate plan every few years.
Choosing Components for Your Estate Plan
A comprehensive estate plan will have several distinct components. The number of components in your plan and which components they are will be decided after consulting with your estate planning attorney. Some of the factors to take into consideration when choosing components for your estate plan include:
- Your family makeup – if you have a spouse and particularly if you are a parent, the manner in which your estate plan is approached will be different than when you were single and without children. Probate avoidance, incapacity planning, and a trust are three common additions when you have a family. Probate avoidance becomes important to ensure that your spouse has immediate access to assets for financial support in the event of your untimely death. A trust is necessary to protect your child’s inheritance, because a minor cannot inherit directly from your estate. Incapacity planning is needed to ensure that your spouse has the legal authority to control your assets and make decisions for you in the event of your incapacity – or in some situations, to prevent your spouse from having that control and authority.
- The value and complexity of your assets –the more valuable and complex your assets, the more complicated and complex your estate plan needs to be. For example, if your estate is likely to incur federal and/or state gift and estate taxes, you will need to focus on tax avoidance within your plan.
- Your age – as you age, it becomes more important to add certain components to your plan. For example, retirement planning should be included by the time you are in your early 30s. Medicaid planning is usually added to a comprehensive estate plan as early on as possible, but certainly by the time you each your 50s. Funeral planning is a wise addition at any age, obviously becoming more essential in your golden years.
- Your gifting intentions – do you want to give everything to your spouse who will then leave everything to your kids? If so, reciprocal Wills are probably your best bet. If you want to stagger the inheritance you leave your children, a trust and a Pour Over Will should be sufficient.