Estate Planning Basics: Part I

Do you think estate planning is only for wealthy individuals and families with millions in assets? Think again. If you have children, elderly parents, savings, a home, or any of the above, estate planning protects your family in the event something bad happens to you.

The truth is, 55% of Americans don’t have a living will, and are therefore vulnerable to expensive legal fees and court battles. Even though it may seem morbid, estate planning can be invigorating because you can examine who means the most to you and ensure their financial future.

Consider your Situation

When determining what you need, Gill says first to consider your family situation. Are you married? Do you have children? How old are they? Immediate family setup directs a segment of the process.

Next, examine the level of assets to minimize the estate taxes you must pay at the federal and state levels. While you may not have enough assets to be subjected to estate taxes, you can’t plan soundly without looking carefully. Some states, like Florida, are a great place to retire because they don’t assess their own estate taxes.

Avoiding Probate Court

Without estate planning, you could end up in probate court, a process that can consume your family’s time and money. The court will look at your will, heirs, and potential creditors, and then oversee the allocation of your assets. LegalZoom estimates annual probate costs to total $2 million for American families, with $1.5 million being attorney fees.

Avoiding the probate process is ideal. Assign a beneficiary designation to certain assets like life insurance policies and tax-deferred accounts. In the event of death, the asset will transfer to the beneficiary.

Other Estate Planning Considerations

Other items to consider are a health care proxy and durable power of attorney. A health care proxy will make medical decisions for you in the case you cannot make them for yourself. Giving someone durable power of attorney will allow them to carry out your financial obligations if you cannot.

Cohen & Burnett offers estate planning and fiduciary management, delivered by trusted legal professionals with the experience and specialization you require. To learn more about our services, please visit our homepage today. To learn more about estate planning, make sure to read Estate Planning Basics: Part II where we will discuss creating revocable trusts, retitling your home, and reviewing your estate plan.

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