The Importance of Estate Planning for You and Your Heirs
They’re an important piece of the pie, but wills are not the only way to plan your estate. Estate planning is about putting your legal, financial, and medical affairs in order and can include wills, revocable or irrevocable trusts, living wills, powers of attorney, gifting, and creation of family limited partnerships. Other aspects may include joint tenancies in bank accounts, real estate, and/or stock accounts.
For many people, the most important aspect of estate planning is making sure their heirs are provided for in the best possible way. You may also want to provide guidance for them on medical wishes and decision-making authorities if you’re unable to care for yourself.
Why You Need an Estate Plan
Estate planning is simply the process of preparing for end-of-life issues and controlling your legacy after death. It is not exclusive to the elderly. Anyone with assets to protect, a family they wish to provide for, or concerns about how they’ll be cared for if they become disabled, injured, or sick, benefits from an estate plan.
An estate plan is about protecting your loved ones and yourself. There are many reasons for preparing one; these four can help you avoid potentially devastating consequences for you and your heirs.
- You dispose of your wealth as you see fit. In Florida, if you die without a valid will (intestate), your estate is distributed to relatives based on your marital status when you die and whether you have children, grandchildren, or great-grandchildren. If you have no immediate relatives, your estate goes to the state. In addition, half-relatives inherit as if they were whole. It’s a tricky area of the law that an attorney who specializes in estate planning can help you understand.
- Your tax bite is kept to a minimum. No one wants to burden their heirs with a huge tax burden. Since the IRS limits how much money you can transfer without it being taxed, if you’re passing on substantial wealth to your heirs upon your death, estate planning can help you develop the most tax-efficient approach.
- Family wealth is protected. Estate planning is an excellent way to protect assets from frivolous lawsuits by putting them in legally-protected trusts or limited liability entities. This applies equally to any businesses you may own which might have to be sold to meet tax obligations. Also, homestead laws in Florida differ from most other states so it’s crucial to work with an attorney who understands how to ensure yours is protected in accordance with state law.
- Protect yourself if you become incapacitated. A power of attorney gives a family member or other trusted individual the legal right to use your assets to pay for your living expenses and execute documents on your behalf. A medical or health care advance directive allows someone to make medical decisions on your behalf if you’re left unable to make them for yourself.
Establishing Philanthropic Goals
Many people include legacy planning as part of the estate planning process, setting up family foundations, charitable trusts, or donor-advised funds that support causes important to them while they were alive. If this is something you want to leave behind, it’s best to start early so your family understands your intentions.
The Bottom Line
Estate planning is an extremely specific area of law that is vital for the future of your family and for addressing your own end-of-life issues. The process can be complex and isn’t typically something you want to handle on your own. Consulting with an estate planning attorney can be one of the wisest financial decisions you make.