Estate planning is the process of providing for the care of your loved ones and disposition of property following your death or disability. Estate planning is necessary to ensure that your wishes regarding health care and property are honored during your life and that your loved ones are taken care of when you are gone.
10 Reasons You Can’t Afford NOT to Have an Estate Plan in Florida
Many people think that an estate plan is too costly and time consuming for all but the ultra-rich. This is simply not the case. A solid estate plan can save money and minimize risk in even the simplest Florida estates.
Basic estate plans (such as a simple will, power of attorney, and Florida living will and designation health care surrogate) are not expensive in light of the benefits they provide. The real question is not whether you can afford estate planning, but whether you can afford not to have an estate plan. In many cases, the choice comes down to whether to pay now or pay later. Consider the following:
- Without an estate plan, you lose control over who gets your property at your death. If you die without a will or other estate planning arrangement, the state will determine how your property is distributed pursuant to Florida intestate law.
- Without an estate plan, you have no ability to restrict your beneficiary’s access to their inheritance. Many people have loved ones they would like to provide for, but would like to control the circumstances under which the loved one can access the money. Examples include loved ones who are children, disabled, or too immature to responsibly manage their finances. Estate planning allows you to provide for your loved ones on your own terms. You can control not only who receives your property, but when they are able to access it.
- Without an estate plan, you may lose asset protection opportunities. No one wants to leave property to a loved one, only to have it lost because of a frivolous lawsuit, messy divorce, or irresponsible decisions. Estate planning can restrict a creditor’s ability to reach the assets you leave to your loved ones.
- Without an estate plan, you have no privacy with respect to your personal finances at death. Many people would prefer not to have their financial profile made public record in a probate court proceeding. A proper estate plan can avoid this disclosure and keep your personal information private.
- Without an estate plan, a substantial portion of what you own may be paid to the Federal and state government at your death. If your estate has a high net worth, you may lose a portion of your property to the Federal and state government through death taxes. This loss can be minimized or avoided by proper estate planning.
- Without an estate plan, your heirs may pay unnecessary probate expenses. Each state has its own laws for dealing with the assets of a person who dies without a will. Dying without a will can result in higher legal fees at your death.
- Without an estate plan, you may lose control over who cares for your minor children. If you have minor children, you (and not the court) are in the best position to determine who should care for them. A well-drafted will allows you to nominate a guardian for minor children.
- Without an estate plan, you may lose hard-earned equity in any business you own and control. Business owners often fail to consider how their business will continue to operate after they are gone. If cash is unavailable to your successor, your business will be at risk during the transition period following your death. Proper planning can provide the business with what it needs to continue.
- Without an estate plan, you may lose the ability to prove for your own well-being in the event you become disabled. If you become irreparably brain-damaged, the decision of whether to allow you to die can be expensive, time-consuming, and emotionally exhausting. You can provide for these situations ahead of time through proper planning.
- Without an estate plan, family conflict is more likely after your death. If you leave no clear indication of how you would like your property distributed, your loved ones may be left in conflict about your true wishes. This conflict can lead to lawsuits and bitter family disputes. You can avoid these risks by leaving a clear estate plan that expresses your wishes.
A good estate plan can be thought of as cheap insurance against these risks. With proper planning, you can enjoy the peace of mind of knowing that you have made provision for your property and your loved ones after you are gone.
The Two Components of an Estate Plan
Most people immediately associate “estate plan” with “Last Will and Testament.” A Florida Last Will and Testament allows you to decide who will receive your assets at your death. By incorporating testamentary trusts into your will, you can also control the timing and circumstances under which distributions will be made. And if you want to avoid probate at your death, a living trust can be used to accomplish the same goals as a will.
These “at death” considerations form the death planning component of estate planning. But too often people neglect an equally important component - lifetime planning.
Lifetime planning deals with managing your affairs while you are still alive, but unable to make decisions for yourself. As our population ages, age-related diseases like dementia and Alzheimer’s are becoming a reality for a higher percentage of elderly people. And even for younger people, an unexpected accident could leave them temporarily or even permanently unable to make financial or healthcare decisions. Incapacity planning can help avoid a costly guardianship proceeding in these circumstances.
Lifetime planning can also help you protect your assets. Some individuals – such as small business owners, real estate developers, and physicians – are at a higher risk for frivolous lawsuits than the general population. Asset protection planning can help mitigate these risks.
How Does an Estate Plan Work?
The term “estate plan” actually refers to a variety of tools that are used to manage your property and provide for your loved ones after death. These tools work in combination with each other to achieve your overall goals. The most common tools are wills, trusts, life insurance, powers of attorney, and living wills. A qualified estate planner can use these tools to:
- Provide for the guardianship and financial support of your children
- Ensure that your property will be distributed how you like, with minimal legal hurdles
- Avoid the costly and time-consuming probate process by using revocable trust and survivorship accounts
- Minimize estate taxes and administrative expenses
- Provide cash for your heirs to pay estate taxes and administrative expenses through trusts and life insurance
- Dictate your decisions regarding your own health care should you become incapacitated through medical powers of attorney and living wills
Which Estate Plan Options are Right for Me?
There is no one-size-fits-all estate plan. The estate plan that is right for someone else may be totally wrong for you. And given the recent fluctuations in exclusion amounts and transfer tax rates, the plan that worked for some people yesterday might be disastrous today. Understanding your options is a complex undertaking, and there is no substitute for a qualified attorney. A qualified estate planning attorney will help you identify your estate planning goals and decide between potential options.