Many people think they don’t need an estate plan.
They relate the term to tax planning and feel that
their estate is not big enough to bother. They
therefore think estate planning has nothing to do
But estate planning is more than a method to avoid
or reduce estate taxes. Many young families might
be surprised to learn they should think about estate
Right now there is an effort to abolish or confine
estate taxes to only the very wealthy. Of course,
Congress changes the tax laws constantly, so there
can be no guarantee that this trend will continue.
Be even a normal working class couple with a home,
two cars, money in retirement or 401K plans and
maybe the start of a college for their children can
have a surprisingly large estate. So even if estate
taxes don’t apply today, they may in the future.
Estate planning can be used to distribute your
taxable estate in such a way that taxes are
minimized. There are all sorts of ways to do this
and, if you are wealthy enough, your financial
planners and attorneys should be working together
to do this for you.
For the rest of us, estate planning is less involved
with taxes and more with who inherits your estate;
who cares for your minor children; how you feel
about life support measures; or who will control
your affairs if you are unable to.
Your estate is all you possessions – savings, home,
car, investments etc. If you have a will, your
estate will be distributed according to your wishes.
If you don’t, they will be distributed under state
You would have to check the laws in your state, but
there could be cases that if you die without a will,
your parents would inherit your property, not your
wife or your money could go to distant cousins and
not to your lifelong companion.
So the first reason for a will is to have your property
distributed according to your wishes. If you want to
leave your money to the Salvation Army and not your son,
this is the way to do it.
Many parents use estate planning to try to rein in their
out-of-control children. They may provide for a bequest
that starts at an age when the child has hopefully matured,
say 35. Or they may make provisions that if their daughter
is divorced, no money would pass to the ex-husband.
More commonly, grandparents use estate planning tools to
provide for all or part of their grandchildren’s’ college
education or choose to bypass their family and leave their
money to their favorite charity.
Or a business owner could pass his business to his partners
or employees in order to keep the business running.
A common use of estate planning is to name subsequent
beneficiaries. For example, your spouse would inherit your
art collection on your death and on her death it would go
to a museum.
Another reason for estate planning through a will is to
appoint guardians for minor children or disabled relatives
you are now caring for. If you are leaving a bequest in
your will or the proceeds of an insurance policy (which is
generally not part of your estate) to a minor or person
unable to look after his own affairs, you also need to
appoint someone to manage, conserve, invest and dole out
this money for the care of the minor or incapacitated person.
If you are ill or facing the prospect of losing your ability
to control your own affairs, you can use estate planning
techniques like a durable power of attorney, property
transfers or adding a trusted friend or relative as joint
owner of your property and bank accounts.
You can also provide for a living will, directing how far
you want life support measures to go if you are terminally
So estate planning is more than leaving your grandmother’s
watch to your daughter.
The proceeds of most life insurance policies and jointly held
property with rights of survivorship are not generally part of
the probate estate. Many people believe that they can use
these devices instead of a will.
However, only the specific property held jointly is transferred
to the surviving owner. For example your house would be transferred,
but not any of your separately held investments.
Also problems arise if there is concurrent death, e.g an auto
accident that kills the husband and wife.