The Shocking Truth: What Happens If You Neglect Estate Planning
What is Estate Planning?
Everyone has an estate. It encompasses all your assets and possessions, including your car, home, financial accounts, investments, and personal property.
Estate planning involves determining which people or organizations will receive your possessions after you pass away. It also includes instructions for managing your care and assets if you become incapacitated and unable to make financial or medical decisions.
Estate planning is essentially about determining who gets what and how. The focus is on 'planning' rather than 'estate,' which can seem daunting. It's more about creating a strategy than dealing with the specifics of assets and wealth.
Here’s how estate planning generally works:
Who?
Your estate plan specifies who will inherit your assets and designates individuals to make critical healthcare and financial decisions on your behalf if you become incapacitated. Your estate plan can name legal guardians for minor children and designate adults to manage their financial interests.
What?
Your estate plan directs assets to specific entities or individuals in a legally binding manner. Whether you want your daughter to have your antique desk or your favorite charity to receive $500, it’s all detailed in your estate plan.
How?
The plan outlines precisely how the assets (the "what") get to the beneficiaries (the "who"). For example, you can create a trust to manage a minor child's assets until they reach a certain age or keep assets out of probate to ensure beneficiaries can easily access them.
What’s Included in a Basic Estate Plan?
All estate plans should include documents covering three main areas: asset transfer, medical needs, and financial decisions.
Asset Transfer Documents
The most common asset transfer documents are wills and trusts. These documents outline your wishes regarding:
Distribution of assets to beneficiaries
Guardianship and custody of minor children
Care for special needs individuals
Charitable gifts
Wills
A will specifies who receives what when you die and names an executor responsible for distributing your assets according to your wishes. Wills must go through probate, a legal process where the court authorizes the executor to distribute your assets.
Trusts
Trusts are legal entities that hold your assets on your beneficiaries' behalf, helping avoid the probate process. The two most common types of trusts are:
Revocable Living Trust: This allows your assets to pass outside of probate, remaining under your control while you’re alive. You can serve as the trustee and make changes as needed. Upon your death, a named trustee distributes your assets.
Irrevocable Living Trust: These trusts remove assets from your control, transferring them to a trustee. This helps reduce estate taxes as the assets are officially removed from your estate.
Medical Needs
Estate planning also involves preparing for situations where you cannot make medical decisions. Advance healthcare directives, such as a medical power of attorney (POA) and living will, are crucial.
Medical POA: Designates someone to make healthcare decisions on your behalf if you are incapacitated.
Living Will: Specifies your wishes for end-of-life care, such as life support measures and resuscitation.
Including a HIPAA authorization form in your medical estate planning documents, allowing designated individuals to access your medical records and discuss your care.
Financial Decisions
A durable financial power of attorney lets you name someone to make legal and financial decisions if you cannot. The "durable" aspect ensures this authority remains in force even if you are incapacitated.
What Happens if You Don’t Have an Estate Plan?
Without an estate plan, your estate will go through probate, regardless of size. Every state has a plan for you if you don't have one, but it's rarely what you'd want. Dying intestate (without a will) means the state decides everything, from asset distribution to child custody, creating a slow and potentially painful process for your loved ones.
Don't leave your future to chance.
Ensure your assets, loved ones, and medical wishes are protected with a comprehensive estate plan. At Russo Law Firm, we craft personalized estate plans that give you peace of mind and control over your legacy. Contact us today to secure your future and safeguard your loved ones. Let’s create a plan that honors your wishes and protects what matters most. Reach out now and take the first step towards a secure tomorrow.