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Non-Tax Reasons for Estate Planning-Part One

Although the federal estate tax exemption could decrease in the future, it is currently over $11 million. A decedent’s estate, therefore, will not be subject to federal estate tax if the total value of the estate is less than the more than $11 million exemption. Many may believe that if their assets are under the federal estate tax exemption amount, they don’t need to do estate planning. Although avoiding or minimizing death taxes has been the motivation behind estate planning for many, estate planning is not just for those with substantial wealth and taxable estates. This is the first of a two-part article on some reasons for engaging in estate planning that have nothing to do with taxes.

Provide for the Disposition and Protection of Assets. One of the most important reasons for creating an estate plan is to plan for the disposition of your assets at your death. Rather than allowing the laws of the state where you reside at your death to determine who will receive your assets upon death, by establishing an estate plan, you get to decide who your “beneficiaries” will be and what portions of your assets those beneficiaries will receive. An estate plan allows you to make your wishes clear by specifying not only who is to receive a share of your assets at your death, but also how and when each beneficiary is to receive those assets. For example, if your assets are to pass to your child at your death, you may want to have those assets held in a Trust for a period of time during which a trustee of your choice can manage the assets and use them for the benefit of your child until the child attains an age at which you feel the child can more responsibly manage the assets. A Trust may also be an important asset protection vehicle to shield assets from such risks as your beneficiary’s marital or creditor issues. Establishing an estate plan is also important for those who wish to include friends, charities, or non-traditional beneficiaries who would not otherwise be included under the state laws that apply when one dies without a Will.

Avoid Probate. Avoiding probate is another reason to engage in estate planning. Probate proceedings are, for the most part, matters of public record. Anyone can usually visit the probate court and obtain copies of probate records, and many courts now have probate records available online. Avoiding probate keeps your estate affairs private and out of the court system. Avoiding probate also typically allows your estate affairs to be settled more quickly and at a lower cost than having your affairs settled through a probate court proceeding.

Taking the time to put a comprehensive estate plan in place will allow you to direct who will receive your assets at your death and under what terms and conditions. By engaging in estate planning, you may also put a plan in place that avoids the probate court being involved in the settling of your affairs.