We live in strange times, and if anything is certain, it is the sheer uncertainty of life. Whether it is a climate catastrophe, a crime wave, or a pandemic, the news cycle is full of endless sources of anxiety – and even under ideal circumstances, all good things eventually come to an end. Yet, these are not reasons to be glum. They are reasons to celebrate the present. For many of us, every waking day presents an opportunity to show gratitude for everything we have enjoyed in life thus far.
And that includes taking our time now to plan for what is to come. Despite understanding its vital importance, less than a third of Americans have organized an estate plan for themselves. Regardless of whether it is a simple will or a complex series of trusts, setting up an estate plan can save your family an inordinate amount of unnecessary stress while securing your legacy and ensuring that your work goes on to enrich the lives of your loved ones for as long as possible.
At first glance, estate planning can seem needlessly complex. Yet, at its core, it is as simple as creating concrete and ironclad instructions for what you wish to have done with the things you leave behind. None of us can take much of what we own beyond the grave, and most people would agree that there’s generally little need for material possessions after death. An estate plan ensures that our possessions are distributed the way we want when we want while further allowing us to manage and preserve perhaps the last thing we truly own in our final days – our dignity – via advanced directives and carefully chosen proxies.
Estate Planning for the Future
In a legal sense, a person’s estate is the sum of what they own, or more specifically, what they leave behind after death. It includes material possessions, tangible and intangible assets, properties, patents, art, artistic creations, and royalties. Estates can be managed as much or as little as one pleases, and when not managed at all, they become automatically distributed as per state law.
Estate plans are highly individual, and no two are the same. While the internet is full of free estate plans and customizable templates, these all leave much to be desired. At the heart of any estate plan is its flexibility to accurately and precisely convey the wishes and will of a person before their death. Most estate plans concern themselves with two things:
- What to do with the material things one leaves behind after death, and;
- Who takes care of any surviving dependents if both parents have died?
Other estate planning considerations include how to mitigate the costs and tax impact of death and the estate’s distribution, protect assets from creditors, and leave behind valid instructions for one’s medical care and financial responsibilities after incapacity or mental decline.
Estate plans are usually drafted, witnessed and signed, and notarized before death and are only valid if the person creating or authorizing the estate plan is of sound mind. Many estate plans are not touched after their creation, but they should ideally be revisited and potentially amended every few years.
Once the decedent has passed, their estate is managed as per their wishes. Wills and the like are designed to distribute an estate and close it once everything has been properly bequeathed to its intended beneficiary or their respective beneficiaries.
But some estate plans can even be written to last years and decades, managing wealth for the sake of charity, or to the benefit of a disabled loved one, or to act as a long-term trust fund for a beneficiary who may be too young to manage their full inheritance wisely.
An estate plan of your own can bring a touch of certainty to an unknown future. You can see to it that your loved ones may be able to make the most of what you leave behind and perhaps lay down the foundation for a growing family wealth over the course of the next few generations.
You can ensure that your death will come to pass with dignity and that your wishes -regarding your medical care and your business – are respected and fulfilled. Estate plans can also help limit the tax impact of your death and ensure that your family won’t be negatively affected by a bequeathment.
Drafting a Will
An estate plan should be crafted and personalized through a professional. The will is usually the first piece of the estate planning puzzle and a cornerstone for most plans. It details what you own and whom you want to distribute it to, as well as who should oversee the distribution. Wills can also be written to create a testamentary trust (a trust created after death) or fund the remainder of your estate into an existing living trust.
When properly created, a will is near undisputable. But going your own way can also open your estate up to petty squabbles and family fights when probate comes around, and it’s time to legitimize the will in court officially. By working with a professional, you ensure that your will accurately reflects your wishes, and you will have someone to approach whenever you want to amend it.
The next crucial step is to choose an executor. Executors are individuals tasked with petitioning probate after your death and executing the will. Executors are named by the probate court, but you can generally name an executor for your will in the document itself. Unless there are severe objections – such as the executor themselves being incapacitated – the court will pick whoever was listed in the will.
Life Insurance, Trusts, and Other Considerations
Another helpful estate planning step is to set up some life insurance – and ensure that the payout is properly distributed towards your loved ones and not the government. By assigning direct beneficiaries to your life insurance or making a trust the beneficiary of the policy, you can minimize the tax impact of death.
Trusts are powerful and flexible estate planning tools, albeit difficult to manage. Unlike a will written, officiated, and kept safe, a trust is a living and existing legal entity that is managed. At the same time, you are still alive and will usually continue to be managed for some time until it has been fully distributed.
Trusts must also be actively funded, which means you must write properties and assets to the trust’s name, effectively transferring them into the possession of a trust. Your control over assets in a trust will be unaffected or limited based on whether the trust is revocable (more flexible) or irrevocable (permanent and removed from your person). There are pros and cons to either choice.
There are many reasons to go through this much trouble. Trusts can be managed more carefully and specifically, allowing you to dictate to a T how the trust’s contents should be distributed among your loved ones. You can even design trusts to provide income for your children over the next few years and pay out a portion of its principal to charity.
Estate plans can be as simple or complicated as you need them to be. But identifying your needs is not always easy. Be sure to get in touch with an estate planning professional if you are interested in learning more.