Why do I need an estate plan? The answers can be as varied as the individuals who pose the question. Reasons often mentioned include preserving assets, protecting beneficiaries and reducing death taxes. Certainly, the purpose of the core document of any estate plan, the Last Will and Testament, is to provide the testator with a means to state to whom their property will be distributed following death. Historically, wills were used most often by men who had no biological descendants, to devise their land. In modern times, one of the primary reasons for having an estate plan was tax avoidance. Understandably, individuals seek legal means to reduce or avoid potential estate tax liability and trust and estate practitioners are able to oblige through carefully drafted estate planning documents. In light of recent state and federal tax law changes, death taxes are no longer the primary reason the majority of individuals seek to complete their estate plans, as only the wealthiest individuals’ estates are subject to estate tax. So, if not to escape taxation, why do people need an estate plan?
Important reasons for estate planning include specifying who will receive assets following death, naming guardians of minor children, and setting up trusts to provide for controlled distributions to beneficiaries. Comprehensive estate plans not only address the transfer of assets at death, but also lifetime needs such as the management of legal and financial matters, including planning for a potential incapacity, disability planning for yourself or a loved one, planning for the possible need for long term health care, or preparing for a time when you may not be able to manage your affairs. In addition to the will, estate planning documents may include an Advance Directive for Health Care, by which the principal names a Health Care Representative and states end of life wishes; a General Power of Attorney, which authorizes an agent to act for you on legal and financial matters; a Funeral Representative Designation, a document that names someone to make your funeral and final disposition arrangements, as well as other situation-specific planning documents. As additional parts of the estate planning process, beneficiary designations should be reviewed, business succession and charitable giving plans may be addressed, and other matters particular to one’s stage of life will be discussed.