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Five Reasons Why Everyone Needs an Estate Plan
Posted in Estate Planning

The recently enacted Tax Cuts and Jobs Act (TCJA) allows each individual to exempt $11,180,000 from federal estate tax in 2018 ($11,400,000 in 2019). A married couple would need over $22,000,000 in assets before their estate would be subject to federal estate tax. With less individuals owing federal estate tax, you may wonder, “Do I need an estate plan if my estate will not be taxed?” The answer is yes, you do need an estate plan because your estate plan is much more than a tool to reduce federal estate taxes. Regardless of the size of your estate, below are five reasons why you need an estate plan.

Reason #1: Provide for Your Loved Ones

            If you don’t have an estate plan, then your assets will be distributed according to the Indiana laws of intestate succession. The intestate succession laws distribute a person’s assets to particular members of the person’s family and, if there are no appropriate family members, then the assets will pass to the State of Indiana. If you want to leave assets to a significant other or to a friend you must have an estate plan.

            If you have minor children, an estate plan allows you to name a guardian to care for your children in the event that you or their other parent are unable to care for them. You will also be able to designate someone to manage the assets that you leave for your children. A trust allows you to have even greater control of how and when your children receive their assets. If you don’t have an estate plan, the probate court will choose a guardian for your children and the inherited assets. Often this will be a close relative, but it may not be the person that you would choose. An estate plan allows you to make these important decisions and not leave it in the hands of a probate judge. In addition, all assets that pass in this way to a minor child will be distributed to such child at age 18.

Reason #2: Avoid Probate

            An estate plan can help you avoid probate, which is important even if you don’t have minor children. Probate delays assets getting to your loved ones. Probate is also a more expensive avenue that will ultimately reduce the amount of assets that your loved ones receive.

            Because probate is a public proceeding, the court hearings and the documents filed in probate are open to the public. Most people would prefer that the value of their assets, creditor claims, beneficiary identities and the like remain out of the public eye. An estate plan can ensure that your private information stays private.

Reason #3: Minimize Family Disputes

            An estate plan clearly dictates how your assets are to be distributed. This can help reduce fighting among your family because you will have made your wishes known. You can also provide instructions for the distribution of items that you know may cause conflict between family members. Often disputes occur over items that have little fair market value but hold great sentimental value. Such items can cause long lasting strife if they become the subject of a dispute between your beneficiaries.  Instead, an estate plan can allow you to designate the item to a specific individual and avoid fighting between your loved ones. 

Reason #4: Plan for Mental Incapacity

            If you lack the mental ability to make financial and medical decisions, then who will make those decisions for you? Will your family members all agree or will there be disputes as to the best course of action? Who should maintain your property and pay your bills?

            A comprehensive estate plan will include documents that appoint decision-makers to make financial and medical decisions for you if you should become mentally incapacitated. Through medical directives you can also state what type of medical treatments you do or do not wish to receive if you are too ill to communicate your wishes.

Reason #5: Communicate Your Wishes

            In addition to determining the distribution of your assets, avoiding probate and designating certain people to make decisions should you be unable to, an estate plan can communicate other wishes that you may not have expressed to your family. For example, your estate plan may instruct your family whether to bury or cremate your remains or inform your family of your desire to be an organ donor.

            While making your desires known is important, an estate plan also eliminates unnecessary stress for your loved ones. Your estate plan answers many difficult questions and allows your family to focus on the grieving process. 

            For more information, or to have an estate plan prepared, please contact a member of the Estate Planning Practice Group at Bingham Greenebaum Doll LLP.

  • Partner

    Greg works with estate and wealth transfer and matrimonial law in the firm's Estate Planning Department and is also part of the Corporate Services Department. Among the legal services he provides for his clients are estate and gift ...

  • Associate

    Justin is an Associate in the firm’s Business Services Department, where he assists with general corporate and transaction matters. He is an IRS Enrolled Agent, allowing him to represent taxpayers before the IRS.

    While in law ...

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