Saturday, August 1, 2009

Do I Really Need An Estate Plan?

When the economy is suffering and when families and individuals are facing financial pressures, we often decide to "save money." The paradigm is that in order to best protect our remaining assets is by taking the time and spending the money to prepare a comprehensive estate and financial plan. It is thoughtful and preventative planning that helps us reap the advantages of the good times and weather the bad.

Why Have An Estate Plan?

You may have heard the old saying that if you do not plan your estate, the state will do it for you. I even heard a lawyer at a cocktail party last month telling someone that as if it were true estate planning advice. While this may not seem like bad advice when you have more debts than assets (which many of us do if you put our real estate mortgages into the equation), you should reconsider the wisdom of allowing the state to make decisions for you.

A comprehensive estate plan process considers whether your estate will be financially adequate to meet the needs of your beneficiaries and analyzes whether it is wise to purchase or increase your life insurance. The process should also consider the need for supplemental health, disability, and other types of insurance. Carefully analyzed and funded estate and financial plans will provide your survivors with the liquidity and flexibility to meet their needs.

A properly drafted estate plan will save you money because in making your choices clear you can avoid expensive disputes and lengthy court processes, ensuring you have created a financial and legal safety net for your loved ones.

When Do You Absolutely Need An Estate Plan?

So when can I say that you and your family would absolutely benefit from having an estate plan and that it is well worth the amount spent? I am not the hammer that looks at every person's estate as if it were a nail that needs hammering. There are cases where in my professional judgment an estate plan is important for financial and legal reasons:

■ If you have minor children, especially from a prior relationship, you need an estate plan. Even if you do not have significant assets, you must name a guardian for your children and direct which assets will provide for them in the event of your death.

■ If you have a blended family and want to ensure that adult children from a previous relationship are provided for, you need an estate plan.

■ If you or your spouse/partner have a life insurance policy where your children or spouse could receive a significant amount ($250,000 or more) at once. You may want to create a mechanism where the insurance proceeds can only be spent for certain items or ensure it is not all spent at once (the 21 year old son who might splurge on a Ferrari). Or you want to preserve the life insurance so that any new wives/husbands will not have access to the insurance proceeds and that it remains protected for the benefit of your children.

■ If you want to provide for your partner and are unmarried, you need an estate plan -- especially because the state law will not provide for that person.

■ If you want to choose who will make decisions about your finances and health care in the event you become unable to do so, you need an estate plan.

■ If you want to provide for a special-needs child, you need an estate plan.

■ If you want to provide a friend or family member (who is not a spouse, child or one who would receive your estate if you passed away without a will), you need an estate plan.

■ If you want to direct who should receive family heirlooms and other personal possessions, you need an estate plan.

■ If you do not want young adult children to inherit all your assets at once (and have the ability to spend it all over a few short years), you need an estate plan.

■ If you want to minimize expenses from your death or disability, you need an estate plan.

■ If you want to avoid probate, you need an estate plan.

■ If you are affluent and want to minimize estate taxes, you need an estate plan.

■ If you want to provide for a pet or other animal, you need an estate plan.

■ If you want to make charitable donations, you need an estate plan.

In sum, you can better protect yourself, your friends and family, and your assets by making an investment in your estate plan now.

Any questions or comments should be directed to: hm@moravecslaw.com or (626) 793-3210. Henry (Hank) Moravec is a partner at Moravecs, A Professional Law Corporation, in San Marino, California. He focuses his practice on Estate Planning, Trust and Probate Administration, Beneficiary and Trustee Representation, Tax Law, and Nonprofit Law. He represents clients throughout Southern California and his office is conveniently located for clients in the Los Angeles, Pasadena and surrounding areas. The firm website is http://www.moravecslaw.com/