I am often asked by clients why they need an estate plan. The term "estate plan" gives the impression an individual or family must have significant assets to need one, which is simply untrue. The fault lies in the terminology (a common lawyer flaw!). An "estate plan" is really a "family protection plan."
A proper family protection ("estate plan") plan should accomplish the following:
- Provide a fundamental overview of your financial picture and identify any areas which need further investigation.
- Educate you as to: (i) how everything works in the event of death or disability and (ii) how gift and estate taxes are determined and assessed.
- Create a will or trust to direct who receives your property in the event of a death.
- Designate individual(s) to make health care and financial decisions in the event you are incapacitated.
- Ensure all beneficiary designations on retirement accounts are set properly to direct the property appropriately and maximize tax benefits.
- Ensure all beneficiary designations on life insurance policies are designated properly to ensure the proceeds do not go beneficiaries at a young age, unless intended.
- Ensure proper planning for any family members with special needs.
- Ensure the proper individuals are appointed as guardian, executor and trustee and appoint successors in the event one of your designees are unwilling, or unable, to serve.
- Analyze any gift and estate tax liability (or potential future liability).
- Review the need for umbrella insurance, limited liability companies, and other vehicles to protect assets during your lifetime. And,
- Provide a baseline for continuing conversations over time so your plan can be updated, tweaked, or revised to meet your changing circumstances and needs.
All of the above provide basic protections to individuals and families. Additionally, a good plan drastically reduces the likelihood of conflict in the event of death or disability. These issues all exist regardless of your financial condition. When the focus shifts from "estate planning" to "protection planning," it is easy to see why everyone needs an estate plan.