Note: This Section deals with frequently-asked-questions (FAQ) about estate planning. For frequently-asked questions about Mississippi probate, visit Mississippi Probate Questions. For questions about Alabama probate, visit Alabama Probate Questions.
What is my “Estate?”
Your estate is simply everything you own. Your home, autos, bank accounts, stocks, bonds, annuities, life insurance policies, artwork, jewelry, collection of A-Team memorabilia – it’s all included in your estate. And some things that you may not own–such as future proceeds from life insurance on your life–could be included in your estate for federal estate tax purposes even if they are not included for probate purposes.
Is an Estate Plan the Same Thing as a Will?
No. A will is an important but often insufficient part of a well-designed estate plan. For many people, a proper estate plan will use several other tools in addition to a will, including trusts, life insurance, powers of attorney, and living wills.
What is an Estate Plan?
An estate plan is simply an arrangement to manage your property during your life and make decisions regarding your property and loved ones in the event of death or disability. Estate planning allows you to identify and transfer your property to others in an efficient way and to provide for those you care about after your death. Estate plans typically involve a combination of a will or trust, gifts made during life, and life insurance. Estate planning also allows you to designate who will make health care and other decisions should you become disabled.
Do I Need an Estate Plan?
Estate planning is not only for the old and rich. Even families with meager assets should have at least a basic estate plan to move their assets to the next generation. Young families with children should consider estate planning to identify who will care for their children and manage their finances after the parents’ death. Business owners need estate plans to ensure the future of their business. Any wealthy individual who dies without estate plans can lose a substantial part of their property to death taxes. Estate planning can also keep your financial situation private at your death and avoid the expenses of probate.
What Happens if I Die Without a Will?
Many people believe that if they die without a will (called dying intestate), their property will go to the state. This is true only in the very rarest of cases. Instead, your property will go to others under your state’s intestate distribution system. In other words, the state will plan your estate for you, usually by leaving your assets to certain family members in order of priority. Even if this is how you would actually like your property to pass, estate planning is still important for other reasons, such as avoiding unnecessary expenses (probate and death taxes) and providing for your loved ones if you become disabled.
What are the Basic Goals of Estate Planning?
The basic goals of estate planning are to allow you to control your own property during your life, plan for yourself and your loved ones in the event of a disability, and to pass your property to whoever you choose at death (instead of having the state choose for you) at costs that you are aware of (avoiding the uncertain expenses of probate and death taxes).
What are the Basic Tools of Estate Planning?
Estate planners may use a variety of techniques depending on your individual needs. While there is no such thing as a one-size-fits-all estate plan, the following tools are commonly used by estate planners:
- Wills – tell how and to whom your property will be distributed.
- Trusts – among many things, provide after-death control, incapacity planning, probate avoidance, and continuing care for minor children or disabled individuals.
- Life Insurance – can replace your income, provide for business continuation, and pay estate and other expenses after your death.
- Powers of Attorney – can authorize someone to make decisions about finances and health care should you become disabled.
- Tax Exemptions – can be utilized to save estate and inheritance taxes.
- Living Wills (Health Care Directives) – can provide clear instructions as to your health care wishes if you become terminally ill, comatose, or experience irreparable brain damage.
Who Should I Go To for Estate Planning Advice?
Because every estate plan will require an attorney to prepare the estate and draft the necessary documents, it is always a good idea to begin with a qualified attorney. In many cases, a qualified attorney can handle the entire planning process. If other financial professionals are necessary, they must be able to work closely with your attorney to be sure that each party has the “big picture” in mind. Be sure that each estate planning professional you use has credentials and is willing to direct you to others if additional help is needed.
What Will My Estate Planner Need to Plan My Estate?
Your estate planner will generally need to know three things: what you own, your family situation, and your goals. It is a good idea to prepare a personal financial statement before meeting with your estate planner. Your financial statement should include your personal assets, as well as all investments, insurance policies, business interests, and retirement plans. Your most recent tax returns may also be helpful. With this information, your estate planner can help you identify your goals in light of your family situation. (Note: Feel free to contact us in advance of our meeting for an Estate Planning Worksheet that can help clarify these issues.)
Why Should I Pay Someone to Plan My Estate? Can’t I Just Plan my Own Estate?
Some people resort to self-help methods to plan their own estate. Many do-it-yourself books and computer programs have been created to appeal to this market. And sometimes the documents created under these methods actually work. However, when the documents fail to meet even a small technicality, the results can be devastating. Even if the documents work properly to transfer assets, such transfers may not be in the best interest of the transferor for reasons beyond the transferor’s knowledge. If such mistakes can be undone (they often cannot), the costs will usually far exceed what would have been required to implement an estate plan in the beginning.
About Jeramie Fortenberry
