A great reason to have an estate plan is that you own assets. If you own assets, something has to happen to them when you pass away and can no longer own them. Preparing an estate plan can help to make sure your assets go to the right people. You can use an estate plan to distribute property and personal effects to certain people or charities. If you want one child to have your farm in Oregon and the other child to have your timeshare in Hawaii, an estate plan can make sure it happens the right way. Without one, your assets may have to be fully liquidated in order to distribute them evenly. It would be a shame to lose the family farm because your beneficiaries couldn’t play nice.
While it might be obvious to you who should be responsible for your kids in the event of your death, it might not be to your family or the court system. Without a good estate plan, you run the risk of family fighting over control of your children and the court putting them with whomever they deem most fit. Which might even be “Creepy Uncle Joe.” With an estate plan, you can designate the person you think is the best fit to care for your children – and the court will generally listen! An estate plan can also help make sure that money is held by someone responsible who can portion distributions. Otherwise, your children may receive a “party” fund. So long education, hello Vegas!
If you or your spouse (or both) have children born outside of your marriage, the absence of an estate plan can have a significant effect on the distribution of your assets and the harmony of your family. Not having an estate plan can have the effect of depriving your spouse of part of your shared assets to use for their care during their lifetime. It could also have the effect of depriving your children of inheriting any part of your estate altogether. Particularly with blended families, there is increased risk of contention that could lead to family infighting or financial damage to one side or another. In this situation it is paramount to have a good estate plan in place to prevent unwanted results as to the distribution of your assets and hard feelings from harming your family relationships.
There are very few things people fight over more than money, and this can be especially true for families. A common theme is children fighting with each other about who is entitled to what from your estate. Sometimes one child feels that they are entitled to more than others, that they were the “favorite son” or did more for their parent during the final days. Preparing an estate plan allows you to state in your own words that you would like your assets distributed equally – or perhaps not and that you would in fact like for your “favorite son” to take more. Regardless of what your plan is, having it stated clearly can help to reduce infighting and undesired results. While not everyone is likely to be happy, at least they won’t be fighting amongst themselves and damaging family relationships.
If you have a larger estate, your assets may be subject to estate tax after your death. While the federal estate tax threshold is high enough that it avoids most people, the state of Oregon has the lowest threshold in the nation at one million dollars. Any dollar amount over that that value of your estate assets is taxed in Oregon after your death. This may sound like a large amount, but it is surprising easy to reach as it applies to all of your assets whether they are in the form of real property, personal property, cash, retirement and investment accounts, and anything else you own. If your estate might exceed this this threshold, you may be able to use a trust and/or a plan for charitable gifting to shelter your assets from taxation.
The saying goes that “blood is thicker than water”. The reality, though, is that sometimes we don’t always get along with our family or we have reasons for not wanting to leave money (i.e., gambling or drug problems). If you have no estate plan, your assets will be disbursed to those deemed by the state to have the closest blood relationship to you. Further, it will not allow you to protect your assets from being spent on “bad habits.” Having an estate plan in place can help to keep your assets from falling into the hands of family members to whom you would assume not enrich or would want to put some conditions on the disbursement of funds. It’s your money, leave it to those you want in a way that helps them the most.
No estate plan and no next of kin? That could mean your money goes to the government – oh my! If you die with no estate plan, and if you have no family members of blood relation who can be identified to convey your assets to, the government can step in by law as your “next of kin” and be entitled to your estate. You’ve paid taxes all your life, don’t let the government take the rest of your hard-earned money! A properly prepared estate plan will allow you to avoid this result and enrich the people and charities that you desire.
A comprehensive estate plan affects more than just who gets what when you die but also allows you to appoint persons to help you in case of your incapacity through documents such as a power of attorney and advance directive. These documents allow you to appoint trusted persons to act as your representative when it comes to making financial and health care decisions for you if you are no longer able to do these tasks yourself. A properly prepared estate plan can help ensure that the right people who have your best interests in mind are the ones acting on your behalf – and not some random doctor or your “Creepy Uncle Joe.”
Failing to pre-appoint a power of attorney or health care representative can have expensive consequences for you and those who are taking care of you later in life. If you become incapacitated and can no longer care for yourself there are two ways that people can have the legal authority to act on your behalf: you can pre-appoint somebody before you lose capacity or the court can do it for you. Pre-appointing somebody allows you control and saves money. Having the court do it costs lots of time and money to obtain a guardianship and conservatorship through the court system. Do your family a favor and get these issues squared away well in advance!
An estate plan is a plan for your future. Getting an estate plan when you need one isn’t an option. Once you need one, you either are no longer competent to make those decisions for yourself, you are medically incapable of making those decisions or you’re dead. Once you need it, it’s too late. In this case, failing to plan really is planning to fail. A solid estate plan answers a lot of questions about what to do near or at the end of your life. Getting those decisions taken care of now may seem somewhat morbid, but not doing them now could result in you being unable to do them later. Typical estate plans do much more than just define who gets your stuff. They can help you designate a person to make financial and medical decisions on your behalf, they can set up charitable giving to maximize the benefit your heirs and even make payments over time to heirs who might not be ready to receive a large sum of money. Do yourself and your family a favor, have a solid and clear estate plan in place before you need it.
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