A common misconception is that the primary purpose of estate planning is to reduce taxes. Another misconception is that only people with “a lot of money” need an estate plan. There are plenty of other compelling reasons why a person should have an estate plan.
If you have an estate plan, you can make arrangements so that your assets are distributed or managed after your death according to your wishes. You have worked hard throughout your life to earn and retain your assets, and it is likely that you will want to have control of how they are distributed once you are gone.
If you die without a will or trust, property is distributed according to Colorado law. There is no consideration as to who you want to receive your property, how you want the property divided, and whether you want any special considerations made for those receiving your property (do you need to take into account a child’s special needs? Or an adult child’s spendthrift or substance abuse problems?) Ultimately, an estate plan gives you the final say in what happens to your assets when you are gone.
An estate plan can help you make arrangements for you, you family, and management of your assets in the event that you become incapacitated. There are a number of documents that can plan for incapacity, including living wills, medical durable powers of attorney, parental delegation of guardianship, and financial powers of attorney.
Having these documents in place can give you some peace of mind when thinking about the issues your family would face if you were incapacitated and could not take care of your responsibilities. They also provide you with tools to provide directions as to what type of care you want if you are in a critical medical condition.
Another way to prepare for incapacity is to set up a revocable trust. With a revocable trust, the trustee would manage the assets titled in the name of your trust, and there would be a seamless transfer of control within the trust itself. You and your family could avoid probate court, and maintain your privacy while still having proper control of your assets.
3. Avoid Fighting
Most people know from personal experience, or from stories of others, about family members fighting over Grandma’s earrings. Although it may seem silly, many have a strong attachment to sentimental and personal items of those that are recently deceased. If you come up with a plan as to how personal property, especially the more important items, are distributed, you can prevent those that are left behind from fighting over your personal property.
It may also be a good idea to discuss these items in advance with family members so they know what to expect, and are not surprised by your plan. Not only does an estate plan allow you to distribute your belongings the way you want, but hopefully provides you with a path to leave family members with intact relationships, and avoid fighting over personal items.
Even if you think that you don’t have enough money or stuff to justify an estate plan, if you have children you should consult with an attorney to make provisions for your children if you are gone. It is important to have a plan as to who would have care of your children if you were to pass away unexpectedly while they are still minors.
It is also important to consider who would have control of any money you leave for your children until they reach an age of majority; sometimes the person you want to raise your children is not the same person you would want in charge of the money.
Furthermore, you may want to consider a way to provide those you leave behind with money to supplement lost income when you are gone. A good way to do this would be to get a term life insurance policy while your children are young, especially if you don’t have much in way of assets.
5. Blended Families
It is not uncommon to remarry after divorce or the death of a spouse. If there are children from the prior marriage, or step-children, particular attention may be required to ensure that your assets pass to who you want them to be distributed to if you were to pass away. Oftentimes, there is a concern that your children from a first marriage will inadvertently be disinherited without proper estate planning.
Another concern you may have is the trust-worthiness of your child’s spouse. It is common to want to ensure that assets stay within the family, and a properly designed estate plan can reduce and often eliminate the chance that assets end up going to a child’s spouse if the child ends up getting a divorce.
Essentially, “control” is the main reason to have an estate plan. All other reasons, non-tax and tax alike, are really subcategories of control. One of the first challenges of estate planning is to have a thorough understanding of what you want to do, what you actually can do, and how your goals can be accomplished. You should discuss your concerns and goals with a knowledgeable estate attorney to determine what type of planning would fit your needs.
If you are looking for an estate planning lawyer littleton colorado, we’d love to help you. Give us a call!