An individual works hard to accumulate assets and build their net worth. Over a lifetime, assets such as real estate, businesses, art work, investment accounts, and cash savings can grow into a sizable sum. An estate plan helps shield these assets from taxes and ne’er-do-wells eager to get their hands on them.
Recently, pop star Prince died without an estate plan covering his roughly $300 million estate. Because of this, his heirs are now required to go through the state-ordered probate process. Given the size of the singer’s estate, the process could take several years to finalize.
When an individual dies without an estate plan, surviving relatives and interested parties are left to determine the distribution of the estate. This can be a costly and time-consuming process that can take years to complete even when there are no major points of contention. When an estate plan doesn’t exist, probate fees and expenses can rise rapidly and quickly eat up the value of the estate.
An estate plan protects the assets contained within the estate and ensures that an individual’s final wishes for the distribution of these assets is carried out. In most cases, an estate plan does not take more than a couple of weeks to complete. Thus, it is well worth the small investment of time and money required.
An estate attorney should craft an estate plan that includes the following:
- A Will/Trust to identify who will receive personal property, cash assets, investments, businesses, etc.
- Durable Power of Attorney to assign who may act on an individual’s behalf in the event the individual becomes disabled or incapacitated.
- Healthcare Power of Attorney to determine who will be responsible for making decisions regarding medical care and acceptable treatment parameters.
- Designation(s) of Beneficiaries to identify the distribution of retirement plans, insurance policies, etc.
- Letter of Intent to the executor of the will that defines an individual’s specific requests regarding assets, funerals, or other special requests.
- Designation(s) of Guardianship to determine placement and care of children or dependents.
Together, these documents are used to protect an individual should they become incapacitated or mentally unfit. They further ensure that when an individual dies that estate taxes and other expenses do not unduly burden their heirs. Estate planning is especially important for individuals who have a high net worth, or for those who are concerned that estranged family members may “come out of the woodwork” to lay claim to an estate.