The process of estate planning is essentially taking steps to ensure that as much as possible of one’s financial assets go where he or she wants them to after death. Many of the steps involved occur while a person is alive, so that when a passing does occur the transfer of the affected assets happens automatically with as little difficulty as possible. Most people are familiar with one small aspect of estate planning, such as making a will. However, there’s far more to planning for loved ones and future use of one’s estate than just writing a will alone. Done right, estate planning maximizes all tax protections possible, and minimizes the value loss of affected assets as well. It also ensures that every wish of a person is carried through, not just those that are favorable to one relative versus another.
Having an estate plan is often recommended as one of the core financial steps every person should make, such as having an emergency savings account. This is because regardless of what a person does, there is always the government’s approach which stands as the default approach to an estate’s treatment after a person dies if no instructions are left behind. The government is actually fairly clear that will give a living person every chance to lay out plans for his or her estate before stepping in. However, once a person dies, the remaining estate has to go through a court process called probate. This court proceeding allows a court to review the entirety of an estate, who the potential beneficiaries are, and what assets are to go to whom. All forms of estate planning except a trust must go through probate, even when instructions are left behind. However, the key difference is where there is a detailed plan, the court very rarely overturns or changes such instructions. Instead, the court ensures that they are followed by the administrator of the plan. Where there is no plan, however, the court will then decide who gets what, and that can include anyone, even a non-relative or non-friend.
The estate left behind includes everything a person owned before death. That includes:
- Any land or real property,
- Any financial accounts in a bank, institution or brokerage,
- Any investments,
- Any life insurance policies and holdings,
- Any miscellaneous property like artwork, a car, furniture, clothing etc.,
- Any interest in business ownership or company.
When an estate plan is left behind, those who are instructed to receive a specific property, or the entire estate, are known as beneficiaries. The person left behind who is to administer the estate plan is known as the executor. Sometimes the executor can be a spouse or relative, but in many cases it is an objective third party such as a specified bank officer or attorney.
Ideally, a well-crafted estate plan will do the following:
- It will protect family and loved ones as much as possible and ensure they have the means to continue with financial support if needed, especially when the client is a single-income earner for that family.
- It should specify how all left-behind property is to be addressed and distributed. This can even include donations to charity.
- It will reduce legal delays and random decisions moving property to parties a client may have never intended to get such assets.
- It should reduce and minimize as much as possible any kind of tax exposure in the transfer of assets.
- Detailed plans should also detail how end-of-life medical decisions should be handled so that terminal “limbo” situations don’t drain one’s estate with overwhelming medical costs.
- Finally, the plan should also spell out how a client is to be buried or arranged in a funeral as well as how related costs will be addressed.
Estate plans vary, provide multiple options that fit different situations better than others. For example, someone who doesn’t have a very large estate and may just have few accounts and times that should go to a spouse or a specific loved one will likely be served best by a simple will along with a medical directive for health decisions. On the other hand, someone with a very extensive estate may instead want to split up the estate so that a spouse gets a certain portion, and each child or loved one gets another set portion or specific items. In this case a detailed will combined with a trust may be the far better way to go. Finally, there may be those who don’t want anything to be known about distribution and want to avoid probate altogether. In this case a trust provides the best protection and transfer assets to a legally recognized third entity as an account. This then automatically moves the assets, as planned, to a beneficiary either in a lump sum or over time, as managed by a trust administrator.
An experienced attorney versed in estate planning and probate law is the best guide and resource to work with when making decisions about one’s estate and the future. A good lawyer will make sure a client understands which option for a plan best fits his or her situation, and what other alternatives provided, both good and bad. Such legal counsel will also be well versed in how tax laws affected an estate and related planning and how to minimize such charges. All of these factors can change over time as a person’s life changes, so good representation will also anticipate such changes and offer updates or changes that give the client the best estate plan protection at the time.
Generations Law PLC is based in Scottsdale, AZ and serves clients throughout Arizona, with an emphasis in the Phoenix, Scottsdale (and surrounding) areas. Our attorneys and legal staff have drafted hundreds of estate planning documents for all types of clients, including those with extremely technical situations. Generations Law PLC is available to represent clients with all types of estate planning needs, and no client situation is too small or complex.