Many consider estate planning to be exclusively for older, wealthier individuals with large amounts of property and money to distribute. The reality is that estate planning benefits anyone with assets to pass on to their loved ones, no matter how small. Even if you only have one treasured personal possession that you wish to pass to your best friend, documenting this desire is the only way to guarantee it goes where it should in the event of your passing.
Planning for what happens after we die can feel uncomfortable. However, by planning ahead and organizing your estate before it’s too late, you protect your loved ones from playing an emotionally draining guessing game while they grieve.
What is an estate plan?
Before defining an estate plan, it’s important to establish what, exactly, an estate is. In Texas, your estate consists of everything you own. This includes:
- Land and real estate
- All personal possessions
- Bank accounts and cash
- Life insurance
- Note: Although we may love our pets like family, under Texas law they are classified as property and are considered part of your estate. Estate planning includes establishing a plan for your pets in case anything happens to you, including electing their new owner and specifying instructions for their care.
When you pass away, your entire estate must be distributed. At its core, estate planning is the process of preparing all relevant legal documents ahead of time so that the distribution of your estate will run smoothly when the time comes. You must organize important documents, verify your instructions, and confirm that everything is correct and up to date with current laws. This ultimately saves your family from any unforeseen headaches down the line. With proper estate planning, your wishes will be clear, detailed, and followed with as few tax penalties as possible.
Whenever money and property change hands, tax laws and potential fees must be kept in mind. Forming an estate plan with a qualified lawyer allows your wishes to be met in a way that prevents your inheritors from being disqualified from government aid, protects them from creditors, and/or keeps their inheritance separate from their spouse in the event of a divorce. In short, you plan for problems and create solutions, so your family doesn’t have to deal with the fallout after your death.
I have a will, is that good enough in Texas?
Although a will is an excellent start to your estate planning, it doesn’t provide the in-depth instructions and paperwork you might need for your family to fully execute your will. If there are any errors in the paperwork, it can be a nightmare for your family to work through after you pass.
Beneficiary designations can be out-of-date or invalid, forcing your grieving family to jump through legal hoops to fulfill your wishes. If you aren’t aware of the laws surrounding estate distribution, or don’t hear about new laws that impact your plans, incorrect paperwork can lead to huge tax consequences for your loved ones after your death. If a portion of your estate is intended for a minor’s college fund, not placing the inheritance in the correct type of account means that it could be used by their guardian before they come of age. If this money is misused, that college fund could be greatly reduced or gone before the child ever has a chance to use it. These are only a few of the possible ramifications of not creating a robust estate plan. Although these consequences are unintended, your family can still suffer.
Plus, estate planning goes far beyond just creating a will. It also prepares for the unthinkable and unlikely (but still possible) scenarios that can befall any person. Nobody expects to become incapacitated before death. However, preparing for this possibility allows your family to avoid scrambling to make decisions for you, just in case.
Some elements of estate planning include:
- Creating instructions for your care should you become incapacitated prior to your death
- Pre-arranging for disability payments to replace your income should you be unable to work due to injury or illness
- Preparing long-term care insurance to help pay for your end-of-life care, improving the quality of your care and removing financial burden from your family
- Documenting the transfer of a business in the event of retirement, disability, or death
- Naming guardian(s) for your minor children in case of incapacitation or death, including instructions for their care
Specific legal documents are required to ensure that all your wishes are adhered to. This includes not only your will, but also power of attorneys, living wills, and trusts. Unlike creating a will and forgetting about it, estate planning encourages adjustments over time. As your family and finances grow or change, you can update your plan to fit your new expectations.
Do I need an estate plan even if I’m young?
This is a very common and understandable question. Estate planning is important for everyone, even if your estate is small. Although you may be young and don’t have as large of an estate as you might one day, estate planning ensures that your valuable items, including pets, will go to the correct loved ones. Illness and mishaps happen to people of all ages, and planning for unforeseen circumstances ultimately shields your loved ones from difficult, emotional decisions.
Estate planning protects your loved ones.
It’s never too early to start planning. Sitting down with an estate planning attorney may feel uncomfortable or inconvenient now, but an experienced attorney will give you crucial direction in how to structure your estate plan in a way that best benefits your inheritors. They will walk you through the possibilities you might not have considered, and assist in creating clear, concise instructions. In the end, estate planning will provide peace of mind to you and those around you. When the time comes, your detailed wishes will be a tremendous gift to your grieving loved ones. Instead of your family having to guess what you would want, they will know.