When it comes to estate planning, the complexity of your estate plan should generally match the complexity of your estate. It’s true that smaller and simpler estates call for smaller and simpler plans – but there’s more to estate planning, inheritance, and legacy management than a basic last will and testament.
In most cases, you don’t need your attorney to go all out and devise several complex trusts in your name. However, getting a free template will off the internet and using it as a foundation for your estate plan is not a good idea either. It’s safest to employ a healthy middle ground, making use of the legal knowledge and experience of your estate planning professional, while insisting on a plan tailored to your needs, and only your needs.
While most people don’t need estate plans that deal with the current federal estate tax exemption limit, or hide their assets from numerous creditors, most people do want control over how they distribute their property, who will take care of their young children, and who will deal with the financial decisions that need to be made after their death. Estate plans are about more than just inheritance.
Estate Planning, Death and Self-Determination
Estate planning tools are meant to establish the means with which individuals can choose how their legacy will continue to affect others after their passing. It also gives them a greater degree of freedom over how their property and autonomy is treated if they are mentally incapacitated, yet alive.
Through estate planning tools, you can determine who will be in-charge of critical financial and medical decisions if you’re incapable of making these decisions yourself. Through tools such as trusts, you can entrust important personal and real property to individuals for management and safekeeping until you pass away.
Through a professionally drafted and properly devised estate plan, you can ensure that your children will be raised by loving relatives and supported financially well into adulthood by the fruits of your labor. With the right plan, you can save your family a lot of time and trouble, minimizing the effects of a complicated estate, especially if you possess property in several states, or if you share a tangled and fractious relationship with other members of your family.
A basic will is a step in the right direction, considering that an overwhelming portion of American adults do not have any form of estate planning, despite agreeing that it’s important. However, a will has its limits.
What a Basic Will Can and Cannot Do
A last will and testament allows you to:
- Determine who gets what, including individuals that are not technically in line for inheritance.
- Determine who gets nothing, allowing you to exclude individuals to a certain extent.
- Determine who becomes guardian of your minor children, until they are of age.
- Determine who should be responsible for executing your will.
- Waive an executor’s bond, which can be helpful for reducing costs if the executor in question is a trusted family friend or relative.
- Fund property into a living trust.
However, a basic will cannot:
- Gift assets that are excluded from the probate process, such as jointly titled property, or property with beneficiaries, or accounts that have designated beneficiaries (life insurance, remnants of retirement funds, bank accounts with payable-on-death titles).
- Distribute property already held within a living trust.
- Grant access to a bank account or funds left to any given beneficiary (instead, the executor must transfer the funds accordingly).
- Direct how you are to be buried or honored, as wills are typically dealt with after funeral proceedings, as well as the fact that there is no official ‘reading of the will’. It’s best to discuss funeral preparations with your family before you leave or leave instructions elsewhere.
- Reduce estate taxes. Depending your state, your estate may have to pay taxes before distribution. The federal estate tax exemption is $11.4 million per individual in 2019, but state estate tax exemptions may be lower. There is currently no state estate tax in the state of California.
- Avoid probate. The probate process cannot be avoided through a will, and while you might not need to, it is within the interest of some estates to avoid probate in order to reduce costs.
More Than Death – Dealing With Incapacity
Estate plans often include tools that aren’t necessarily important to a person’s death, but much more critical in preserving their choice and dignity in life. Durable power of attorney documents, living trusts, and living wills (or advance healthcare directives) are all tools that either allow trusted individuals to make critical choices in the management of a person’s health, finances, or assets, or help medical professionals avoid treatments that an unresponsive or incapacitated patient would not have consented to.
Through a durable power of attorney, a trusted person (often a spouse or partner) is given the right to make financial or medical decisions in the principal’s name. Through a living trust, property funded into the trust is automatically managed by the trustee should the grantor be incapacitated, or mentally incapable of managing the property.
An advance healthcare directive or living will ensures that you reserve the right to determine your end-of-life care, without being mentally or physically present to discuss said care with your healthcare provider. These tools and others like them help ensure that your property and body are treated as you would see fit, even if you’re unable to speak for yourself.
While wills do have their place and purpose, they are not always comprehensive enough to warrant being the sole element in a person’s estate plan. On the other hand, a cluttered and complex estate plan may not be what you need either. It’s important to consult a professional on estate planning matters before making any critical decisions.
Powerful tools such as living trusts can be helpful for many cases, but they are not always necessary. An estate planning attorney can help navigate these issues and develop a tailored plan.