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Estate Planning

When Should You Do Estate Planning?

9 min read
Philip Ahn, Attorney

by Philip Ahn, Attorney

Estate planning is usually attributed to older people who have a lot of wealth. However, this could not be further from the truth. Creating a strong estate plan can be beneficial regardless of your age, income, or assets. 

There is no age or a specific amount of assets that dictate when you should begin estate planning. If you want to protect your health, your assets, and your loved ones after you pass away, create an estate plan as soon as possible.

Let us put you in contact with an estate planning lawyer in your area.

Without an established estate plan, your heirs could face massive taxes, probate fees, and have little to no control over how your assets are divided. Additionally, you will not have any say over your end-of-life care or life-prolonging measures. 

Learn more about when you should do estate planning below. 

Why is Estate Planning Necessary?

Estate planning allows you to choose who gets what after you die. It permits you to name guardians for your children and reduce estate taxes. It can help to minimize disagreements amongst your family, and so much more. Estate planning is necessary for the following reasons. 

  • It Protects Your Beneficiaries: Without an estate plan in place, your beneficiaries could face high taxes and fees. That’s in addition to the confusion left behind when a person dies without a clear estate plan in place. 
  • It Protects Your Children: Within your estate plan (specifically a will) you can name guardians for your children in the event you pass away before they are age 18. If you do not list potential guardians, the courts decide who takes care of your children. 
  • To Decrease Costs: An estate plan can help to shield your family from some or all probate fees, estate taxes, and other transfer taxes. There are also methods to reduce income taxes for the beneficiaries. 
  • Helps Eliminate Family Fighting: While it will not eliminate all family fights, it can at least reduce tension and provide your heirs a clear plan. 
  • It Can Make Retirement Easier: Proper estate planning can help ensure that your assets are accounted for and you remain qualified for government assistance when you retire. 
  • Creates Plans For Incapiciatation: If you are incapacitated and/or unable to make decisions on your own, having clear instructions to explain your wishes such as resuscitation, feeding tubes, and other end-of-life care can be beneficial. Otherwise, those decisions will be left to someone else. 

Estate Planning vs a Will

A will is an important part of any estate plan, but it is not the whole thing. A will can do unique things that other estate planning tools cannot such as name guardians for your children as well as pass down certain types of assets. Even if you have created a living trust, a will can serve as an option for those assets that can’t be “placed in trust.” 

Estate Planning Checklist

No matter who you are, what stage of life you are at, or the size of your bank account, some level of estate planning will be good for you. It’s important to note that everyone’s estate plan is unique. It can be beneficial to consult with an estate planning lawyer to learn more about your options. 

Listed below are a few of the most important considerations when creating your estate plan. 

1. Cover the Basics

A comprehensive estate plan requires planning for your property after you die, how your assets will be distributed, your family’s finances, avoiding probate where possible, and limiting tax liabilities. It should address your desires for what happens upon your death or incapacitation. 

In addition, it should cover medical treatment planning as well as guardianship designations for children under age18. 

2. Make Plans For Your Asset Ownership

Some people opt to pass assets to their heirs via a will or a trust. However, you can also add joint owners to titled assets such as real estate, cars, etc. Additionally, you can add joint owners to your financial accounts so when you die the assets in the account are owned by them. 

This could potentially trigger federal gift taxes depending on how much the assets are worth. Adding a joint owner to your assets or accounts also means that you will need their permission before you sell those assets or use them as collateral for a loan. 

3. Choose Your Beneficiaries

When choosing your beneficiaries it is recommended that you choose secondary heirs that will receive payments from your estate in the event the original beneficiary has passed away. Certain assets require you to give beneficiaries current ownership rights, while others allow you to designate someone to receive the property after you die with no current rights. 

This can be accomplished through pay-on-death designations for your bank accounts and other financial accounts. You can also use transfer-on-death designations in some states for real estate, cars, and other types of property. 

4. Draft a Last Will and Testament 

Unfortunately, not all property can escape the probate process. A last will and testament can handle any property that must be probated. Additionally, it can take care of minor children and adults with disabilities. It’s in your best interest to choose an executor who you trust, someone who has proven themselves responsible and understands your wishes. 

5. Consider Creating a Trust

A trust is an agreement between the trust maker (also called a trustor or grantor) and a third party, or trustee, to hold assets under strict conditions on behalf of the beneficiaries. 

A popular reason for creating trusts is to avoid probate. The most common type of trust is a revocable living trust, which allows you to control the assets in a trust while you are living, change it, or revoke it at any time. 

On the other hand, with an irrevocable trust, once you place your assets in it, you have limited control and can’t change or revoke it. However, these can be excellent tools to lower your taxable income. There are many types of trusts to consider:

  • Marital Trust
  • Tax Bypass Trust 
  • Charitable Trust
  • Generation-Skipping Trust
  • Life Insurance Trust
  • Spendthrift Trust
  • Special Needs Trust 

6. Choose a Financial Power of Attorney

A financial power of attorney is a document that allows you to authorize someone else to handle your finances should you become unable to. The person that gives the authority is called the “principle” and the person that is given the authority is called the “agent.” The financial power of attorney can become effective either upon your mental incapacitation or immediately. 

7. Consider a Healthcare Power of Attorney

Similar to the above, a healthcare power of attorney designates a trusted person to make healthcare decisions on your behalf should you become unable to do so yourself. You should leave detailed instructions for this person as they will be in charge of critical decisions like end-of-life care, resuscitation efforts, hospice decisions, etc. 

In most states, the healthcare power of attorney has instant access to medical health records. Other states require more paperwork for access to medical history. 

8. Create a Living Will 

Though it sounds the same, a “living will” is much different than an actual will. Also called an “advance directive,” a living will details your wishes regarding the type of life-prolonging treatments you would like and those you don’t desire. A living will typically serves as a guide for the healthcare power of attorney. It can also help to protect you in case they are unable to serve their duty. 

9. Leave Specific Details For Your Executor and a Statement of Desires

When developing a comprehensive estate plan the more details you leave behind the better. While a Statement of Desires is not a legally binding document, it could give additional guidance to executors, powers of attorneys, and others. Within your statement you should include the following information: 

  • Financial account information 
  • Insurance policies
  • Loans, credit cards, mortgages
  • Online passwords to important accounts 
  • Contact information of loved ones to contact when you pass away
  • Where all of your assets are located
  • Funeral wishes
  • Organ donation considerations 

Should I Hire an Estate Planning Lawyer?

If you have rather simple estate planning needs, you can easily create a will on your own as well as draft other documents. There are many free resources available online to help you. However, it is recommended that you have an estate planning lawyer to at least review your plan. 

Additionally, if you have more complicated estate planning needs such as large assets, the need for trusts, gifts to charity, complex asset ownership, etc. then working with a proven estate planning lawyer is typically necessary. 

Estate planning lawyers can help to sort out complex financial situations that affect you and your family. You should consider hiring an estate planning lawyer if you fit into one or more of the following categories:

  • You have been married multiple times
  • You own a business 
  • You have children
  • You wish to leave your estate or parts of it to charity
  • You own significant assets
  • You have specific disbursement requirements 
  • You have a taxable estate 

How Much Does Estate Planning Cost?

The cost of estate planning can vary greatly depending on the state you live in, the assets you have, and your overall estate planning needs. 

If you intend on creating a trust and/or have complicated assets, you can expect to spend $3k – $7k upfront (sometimes more) and potentially an additional hourly rate on top of that. 

Fortunately, with unbundled legal services, you can hire an unbundled lawyer to handle certain parts of your estate plan and save money by taking care of the rest. Learn more below. 

Save Money With an Unbundled Lawyer Today 

You can save thousands in upfront fees by hiring an unbundled estate planning lawyer to handle the more complex parts of your estate planning needs, while you handle the rest. For example, you may feel comfortable drafting a Power of Attorney on your own, but prefer to hire an attorney to review it. 

Fees for unbundled legal services start as low as $500 – $1,500. If your estate planning needs are more complex, our network of unbundled lawyers also offers comprehensive estate planning services at an affordable rate. 

Find an Unbundled Estate estate planning lawyer in your area.

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