Sometimes when people think about an estate plan, they think of only a last will and testament, but an estate plan is much more than a will. Especially since all of an individual’s assets can sometimes be distributed without a will. More important are the other documents that comprise an estate plan such as a living will and powers of attorney. These documents can protect individuals and their families while they are still alive, unlike a will which only is effective at one’s death.
1. Manage Consistent Distribution of All Assets
Many assets are distributed through beneficiary designations. Assets such as life insurance proceeds, retirement accounts, and bank accounts with transfer on death designations are distributed via beneficiary designations. Sometimes people also include these assets in their will. This is more likely to happen if an individual prepares a will on their own or with an online template.
If there is an inconsistency between the will and beneficiary designation, the beneficiary designations on file with the financial institution will control who receives the asset. A will cannot overrule a beneficiary designation. It is important for individuals to occasionally update their beneficiary designations and ensure they are correct.
2. Provide for the Physical Care and Custody of Dependents
It is sad that most young parents do not think they need an estate plan, mostly because they do not expect to die any time soon. Young parents need a plan to provide for the physical and emotional care of their children should anything happen to them. Everyone would agree their children are more important than their possessions, however many young parents don’t create a will because they don’t think they have “enough assets.” Your children are your assets! And if you don’t name who will care for your children if something happens to you, then a judge gets to make this very important decision.
3. Provide for the Financial Future of Dependents
Generally speaking, minors cannot directly accept assets from an estate. Property or assets left to minors through a will are held in a custodial account, until such time as they are legally old enough to receive it. In most states, the age is 18 but it does vary from state to state. Most parents would prefer to choose their own conservator to manage the assets left for their children. If parents do not designate a conservator in their will, the court will designate one on their behalf.
Better yet, a parent can set up a trust to benefit their children and authorize to trustee to provide for their children in whatever manner the parent decides.
