Many people do not have an estate plan because they don’t know exactly what estate planning is or why it is important. In this post we would like to demystify things and provide some foundational information.
Transferring Financial Assets
When you pass away you may well have assets. These assets are called your estate. Estate planning involves making preparations for the distribution of these assets that comprise your estate.
This is done by recording your wishes in a legally binding matter. There are various different legal devices that can be used to accomplish this aim. One of them is a last will. With a last will you express your choices regarding how you want your remaining assets distributed among your heirs after you pass away.
These distributions don’t happen magically. A human being has to manage the business of the estate, and this person is called the executor or executrix. An executor is an estate administrator who happens to be a male, and an executrix is a female estate administrator.
When you’re choosing your executor or executrix you should recognize the fact that this individual should know a good bit about business matters because he or she will be handling the business of the estate. This can involve paying final bills including tax bills, inventorying assets, and potentially liquidating assets. The executor would also have to defend the estate if someone wanted to challenge the last will.
In addition to the business acumen that is required, administering an estate can time-consuming. As a result, you should choose an executor who has the time that it will take to get the job done.
You could use a last will, but there are other options available to you. The ideal vehicle or vehicles of asset transfer will vary depending on the exact nature of your circumstances. Some people have to concern themselves with the estate tax, and there are those who have asset protection concerns. Estate planning for small business owners requires a specialized approach, and this is also true when you want to provide for a minor or someone who has a disability.
When you’re planning your estate you should also consider the period of time that may lead up to your death. Incapacity is not uncommon among elders, and it is entirely possible that you will lose your ability to make sound decisions at some point in time.
To account for this possibility your estate plan should include durable powers of attorney. With these documents you name agents who would be empowered to make decisions in your behalf if you were to become incapacitated.
This is a brief overview. If you would like to learn about estate planning in a more comprehensive manner by all means, contact our firm to request a free consultation.