There are many reasons why estate planning is important.
No one likes to confront their own mortality, and deciding what will be done with your assets upon your death isn’t the most pleasant of subjects.
That may be the reason that as many as half of Americans don’t have a will or other estate planning documents in place.
But there is comfort in knowing that a good estate plan will prevent dissension and chaos among survivors.
Estate planning can be a somewhat complicated process, but as difficult as the planning process may be, it is the responsible thing for people to do for those they will leave behind.
For those who do seek professional help with their estates, what are the most important reasons that clients seek estate planning advice?
The No. 1 reason is to avoid probate, according to the 7th Annual Industry Trends Survey conducted by the WealthCounsel and WealthManagement.com.
The survey had more than 1,200 respondents, primarily attorneys, as well as financial planners, CPAs and other wealth advisers.
There is good reason to avoid probate. Much of a deceased’s estate will be tied up during the probate period, which can last 18 months or longer.
In addition, court fees, attorney fees, executor fees, accounting fees and appraisals may cost as much as 3 to 7 percent of the estate. Depending on the complexity of the estate, costs can go even higher.
Probate is a public process in most states. Many people don’t like the idea of their personal financial information being open to public scrutiny.
A will does not protect an estate from probate. Probate is the legal process through which the executor and beneficiaries prove to the court that they are acting in accordance with the will.
Without a will, the probate process follows state intestacy laws, which vary from state to state. Probate usually limits the time during which a will can be challenged by heirs or claims can be made by creditors on the estate. The probate court supervises the activities of the executor.
Next in line behind avoiding probate in the survey is avoiding family chaos, according to 57 percent of the respondents.
Protecting their children’s inheritance (39 percent), minimizing estate taxes (34 percent) and seeking asset protection (22 percent) rounded out the list.
An estate plan should include a will, power of attorney, healthcare power of attorney and potentially a trust. Adjustments to the plan should be made after life-altering events, such as a marriage, divorce or birth of a child.