This is an article from the law office of Morris Hall, PLLC (https://morristrust.com/) in Phoenix, Arizona, that we thought others may find helpful.
Surveys tell us that despite understanding the importance of having a well thought out estate plan in place, over half of all Americans have yet to create their estate plan. One of the most common reasons people give for the lack of estate planning is that they are intimidated by the prospect of creating an estate plan. After all, estate planning concepts are not concepts the average person deals with in any other area of his/her life. It really is not surprising that people are a bit intimidated by the thought of trying to create an estate plan. If you are among those who have put off creating your estate plan because you are unsure where and/or how to start, look over our answers to the top five estate planning questions. It should help you feel more at ease with the concept of estate planning.
- I don’t have a large estate yet. Why do I need an estate plan? This is a very common misconception about the need for an estate plan. People frequently think they need to have amassed a large fortune or be married with children before the need for an estate plan arises. The truth, however, is that every adult should have at least a basic estate plan in place. Although you may not have acquired numerous valuable assets yet, the assets you do own probably mean something to you. Consequently, you likely do NOT want the state deciding what happens to them after your death.
- My minor children cannot inherit from me directly. How do I leave them an inheritance? Minors cannot inherit directly from anyone. If you are married, you may simply leave your entire estate to your spouse to hold and manage for your children until they reach the age of maturity (18 years old). If you are unmarried or you are concerned about your spouse’s ability to manage their inheritance, a trust may be the better choice. A trust allows you to name anyone you want as the Trustee who will manage and invest the trust assets and administer the trust terms. Your children can benefit from the trust assets while they are minors and then receive what is left once they reach adulthood or the age you select.
- How can I plan for the possibility of my own incapacity? Your estate plan can include an incapacity planning component. Within that component, you may decide to create a revocable living trust that is often used as an incapacity planning tool to shift control of your assets to the person of your choice if incapacity strikes. You may also include advanced directives that address your medical care in the event of your incapacity.
- How often should I review and revise my estate plan? As a matter of course, you should review every three to five years during your working years and every five to eight years during your retirement years. Certain life events, however, call for an immediate review. If you get married or divorced, have a child, or move to another state, for example, you should review your estate plan right away.
- How can I keep my estate from going through probate? Probate avoidance is a common estate planning goal because formal probate can be costly, in terms of both time and money. The key to avoiding probate (or at least minimizing the time your estate spends in probate) is to leave behind as few probate assets as possible. Non-probate assets bypass the probate process altogether. Common examples of non-probate assets include:
- Assets held in a trust
- Life insurance proceeds
- Assets held in an account designated as “payable on death (POD)” or “transfer on death (TOD)”
- Certain types of jointly held property
- Funds held in many types of retirement plan or pension plans