An estate plan is a map that reflects the way you want your personal and financial affairs to be handled in case of your incapacity or death. It allows you to control what happens to your property if you die or become incapacitated.
If you're married, the odds are that you're going to outlive your husband. That's significant for a couple of reasons. First, it means that if your husband dies before you, you'll likely inherit his estate. More importantly, though, it means that to a large extent, you'll probably have the last word about the final disposition of all the assets you've accumulated during your marriage.
Estate planning may be especially needed if you have minor children; your net worth exceeds the federal transfer tax basic exclusion/exemption amount ($12,060,000 in 2022, $11,700,000 in 2021) or, if less, your state's exemption amount; you own property in more than one state; financial privacy is a concern; or you own a business.
Incapacity can happen to anyone at any time, but your risk generally increases as you grow older. You have to consider what would happen if, for example, you were unable to make decisions or conduct your own affairs. Failing to plan may mean a court would have to appoint a guardian, and the guardian might make decisions that would be different from what you would have wanted.
Health-care directives can help others make sound decisions about your health when you are unable to. These might include:
There are also tools that help others manage your property when you are unable to, including:
A will is quite often the cornerstone of an estate plan. It is a legal document that directs how your property is to be distributed when you die. It also allows you to name an executor to carry out your wishes as specified in the will and a guardian for your minor children. You can also create a trust in your will. The will should be written, signed by you, and witnessed.
Most wills have to be probated. The will is filed with the probate court. The executor collects assets, pays debts and taxes owed, and distributes any remaining property to the rightful heirs. The rules vary from state to state, but smaller estates are exempt from probate or qualify for an expedited process in some states.
For most estates, there's little reason for avoiding probate, as the actual time and costs involved are modest. And there are actually a couple of benefits to probate. Because the court supervises the process, you have some assurance that your wishes will be abided by. And probate offers some protection against creditors, since creditors are generally required to make their claims against the estate in a timely manner.
However, there are a number of reasons for avoiding probate as well. For some complex estates, probate can take up to two or more years to complete and tie up property that your family may need, while running up executor fees, attorney fees, and insurance costs. And, if you have real estate in more than one state, probate may be required in each state. Also, wills and other documents submitted for probate become part of the public record, which may be undesirable if you or your family members have privacy concerns.
There are ways to avoid probate, if that is your wish. Probate may be avoided by owning property jointly with rights of survivorship; by completing beneficiary designations for property such as IRAs, retirement
plans, and life insurance; by putting property in an
inter vivos trust; and by making lifetime gifts.