A common misconception among people, especially those young(er) or unmarried, is that they don’t need an estate plan. Even among individuals who are married, many think that their spouse will simply be able to take over their affairs should they be unable to due to death or incapacity. While this latter assumption may hold some truth, not having an estate plan, even if you are married, can still present a myriad of issues upon incapacitation or death.
Another misconception is that only rich people have an estate plan. Again, this is untrue, given that everyone deserves to know that the nest egg they’ve built will go to the heirs they intend it to regardless of its size or that they will receive the health care they want and deserve should they become ill and not be able to make decisions on their behalf.
The moral? Everyone, young or old, rich or poor, or middle class, can benefit from an estate plan. Here is what an estate plan can do for you.
Distribute assets.
An estate plan allows you to designate how you would like your assets to be distributed among your beneficiaries. Without an estate plan, specifically a will, Alabama state law will dictate who will inherit from you and in what order.
For example, if you die intestate (without a will), your children will inherit your estate first. If you do not have children, your parents will then inherit your estate. If no children or parents are beneficiaries, your estate will be distributed among your siblings. If no family members can be located, your assets will go to the state.
Think about the relationships you have in your lifetime. No doubt, relationships with family can be complicated, which means succession laws might not align with your intentions for your estate.
Protect your beneficiaries.
An estate plan allows you to protect your beneficiaries in various ways. This is especially important if children are minors or have special needs that require them to be cared for well beyond the age of majority. The type of trust you will need will depend on the purpose of the trust.
There are testamentary trusts, which are included in a will and are created upon your death; revocable trusts, which are created during your lifetime and offer you the option to make changes while you are alive; and irrevocable trusts, which are created during your lifetime but end your decision-making once they go into effect. An Alabama estate planning lawyer can advise you specifically about which trust would be best given your individual situation.
Avoid a long and expensive probate.
In Alabama, all wills must go through probate before they can take effect. However, for smaller estates (as of 2023, those below $34,611), per the Alabama Small Estates Act, the will can go through what’s known as summary probate, a streamlined procedure that doesn’t necessitate full probate.
It is important to note that some assets fall outside the will, meaning they won’t be subject to probate. Often, while creating an estate plan, your estate planning lawyer will pinpoint the following instruments and suggest how to handle them so they wind up in the right hands after you die. They include pay-on-death (POD) bank accounts, investment accounts that transfer on death, life insurance, retirement accounts, assets held in trust, and real estate or other property held in joint tenancies.
Tax Planning
Estate planning can help minimize any taxes your beneficiaries may have to pay on your estate. Setting up trusts or making gifts during your lifetime, for example, can help reduce estate taxes. Your estate planning lawyer and an Alabama tax professional can guide you further.
Health Care Directives
Estate planning includes documents such as a living will and a medical power of attorney (sometimes known as a durable power of attorney for health care or health care power of attorney). These documents are different.
The purpose of a living will is to communicate your wishes regarding medical treatment if you cannot make your own decisions, including whether you want to be placed on life support. A durable power of attorney for health care, on the other hand, empowers the individual you name to actually make medical decisions on your behalf should you be unable to.
Naming Guardians
If you have minor children or an adult in your life who you are responsible for and who will require continued oversight, an estate plan can help by allowing you to appoint guardians to care for them after you’re gone. Making these decisions in advance and seeing to it that they will be implemented after you die can offer peace of mind while you are alive.
Business Succession
Estate planning provides added protection and security for business owners. Imagine all of your hard work being left in the hands of others who may not have the same interests as you. An estate plan can enable a smooth handover to the successors you choose, helping to retain your business’s continuity in your absence.
Hire an Alabama estate planning lawyer.
The above discussion is only the tip of the iceberg concerning the benefits an estate plan can offer individuals and business owners. How simple or complex your estate plan will be depends on the details of your situation and your intentions for the future.
As we all know, the future is not written in stone. That’s why even if you have an existing estate plan, it is necessary to re-examine it every three to five years. Changes in your circumstances or your family’s, such as the death of a family member, divorce, or the birth of a child, can each impact your decision-making about your estate and how you want it structured.
At Summit Family Law, our estate planning team has extensive experience handling many estate planning matters, from drafting estate plans where none existed before to revising estate plans to account for life changes, as well as challenges to estate plans and probate. With offices in Huntsville and Birmingham, we are here to support all of your estate planning needs. Call us today to schedule a consultation. Â
