What is an Estate Plan, and Why Should I Have One?

Posted by Shaun Morgan in AssetsDecember 7, 2022(Last Updated December 7, 2022)5 min read
Key Takeaways
  • Everyone should have an estate plan.
  • Start with a will and designated beneficiaries.
  • Move on to a trust for maximum benefits.
Are you ready to make some real money moves?

Having “an estate” sounds like something that is only for the ultra-rich. But everyone has an estate of some kind, so having a plan for your estate is crucial. An estate is all the money and property owned by a particular person, especially at death.


The larger your assets are, the more necessary and complex the estate plan will become. Still, even someone just starting their career should have a basic estate plan.


What is an Estate Plan?


An estate plan is a series of legal documents that dictate what will happen to your estate (assets and items that belong to you) when you die. These documents include a will, power of attorney, and designated beneficiaries on all your financial assets. The assets will include accounts like savings, checking, retirement, investment, and other financial accounts.


Another important part of an estate plan is a trust. Trusts are only necessary for some, but they have plenty of benefits. There are many types of trusts, such as charitable remainder trusts, dynasty trusts, life insurance trusts, living trusts, special needs trusts, testamentary trusts, personal residence trusts, and qualified domestic trusts.


Family is protected by an estate plan including a will and a trust.


A few of the main benefits of having a trust include the following: 


  • A trust can help you and your loved ones avoid the hassle of probate court
  • Specific types of trusts can help reduce your estate taxes
  • Trusts offer additional protection for children with special needs or disabilities 
  • A trust can help divide complex assets fairly between your beneficiaries 


How Do I Get an Estate Plan?


How you get an estate plan depends a lot on your current situation. You should consult a lawyer in most cases, but if that is out of reach, consider using a template to create a will. Then check to make sure your beneficiaries are up to date. 


Another option is to call or check the website of your local county court office. They can provide general information about filing your will or tell you how to seek legal counsel.


Recommended Read: 4 Ways to Build Generational Wealth


Why Should I Have an Estate Plan?


Below is a list of seven reasons why having an estate plan should be your number one priority.


1. Express Your Wishes Clearly


If you don’t have an estate plan, your estate is dealt with according to the laws of the state you live in. However, by creating a basic estate plan, which includes designating beneficiaries and writing a will, you can express your wishes clearly.


2. Avoid Delays


Having a will and designated beneficiaries will make it easier for your family to access your funds as soon as possible. Gaining access to a loved one’s funds can take years if you’re not careful. Having the basics of your estate plan set up can speed up the process of gaining access to your loved one's assets.


3. Avoid Probate Court


The probate process is what happens to your estate after you pass away. Your estate is brought before a judge who will distribute assets based on your will. However, if you don’t have a will then your assets are subject to be distributed based on state laws.


Family sitting on couch relaxing after planning their estate. Peace of mind from having an estate plan.


Going through probate court can be a long, drawn-out process if you don’t have an estate plan. Without a will, your estate could go to someone you never intended to be your heir. An heir is a person legally entitled to the property or rank of another on that person's death. 


Some people you may not want your assets to go to can include a spouse from whom you’ve separated but not divorced, a child who is no longer involved in your family, or a relative you haven’t seen for several years. 


Plus, when lawyers get involved, it can be costly for your family to pay the bill. By creating an estate plan, you can avoid or mitigate the effects of the probate process.


4. The Power of Having a Trust


A huge part of having an estate plan is having a trust. While this isn’t required, it is hugely beneficial. A trust offers you much more power and protection after you’ve passed away or become incapacitated. In addition, trusts do not go through the probate process—at all—and your money can be strategically distributed.

A trust will allow your heirs to access your financial assets sooner, and lawyers aren't involved as much. Everyone should consider creating a simple trust to protect their assets, no matter how big or small.


Recommended Read: Why You Need a Trust to Pass on Generational Wealth


5. Privacy


When your will goes through the probate process, it becomes public record. That means that everything about your life, real estate, cars, home, and every other asset is available for people to look up for free. Of course, this creates an opportunity for scammers, but having your life out there for everyone to see can be uncomfortable for the loved ones involved.


A trust can help your loved ones avoid probate and have more privacy since trusts don’t go through the probate process.


Recommended Read: Trust vs. Will: Differences to Note in Estate Planning


6. Tax Planning


After your death, your heirs may be charged a gift tax for money received as an inheritance. However, with the help of a good attorney, your beneficiaries can pay less in estate taxes and other taxes associated with your passing. One of the biggest benefits of estate planning is that your heirs pay less taxes or no taxes at all. 


7. Less Discord Among Heirs


Unfortunately, families don’t always stay civil when money is on the line, and the passing of a loved one is no exception. Too often, there is fighting over who should inherit what. Usually, this is when a will is involved since wills can be contested in court. 


On the other hand, a trust is different and much harder to contest. Using a trust in your estate plan will likely cut out most of the discord among your heirs since the trust is stricter with minimal recourse.


The Money Wrap-Up


An estate plan is the best gift you can give your family when you pass away. The minimum that everyone should do is create a strong will, so your family isn’t subject to the laws of the state you live in. The next step is to create a trust to reap all the benefits that estate planning can have for your heirs. 


If you want to learn more about estate planning, sign in to your CapWay account and request content from the CapWay team, and they will give you the answers!

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