What Is Estate Planning, And Why Is It Important?

Flynn Law Firm | Your Thorough Estate Planning Lawyer in Cabot, AR

Estate planning is the legal process of committing your intentions, wishes and instructions regarding your assets and personal affairs to writing in advance of your incapacity or death. Because you can’t know what the future will bring, comprehensive estate planning is the best way to guarantee your estate will be handled explicitly as you instruct.

Your estate plan is embodied in a collection of documents. Together, they comprise a full-fledged and detailed plan for controlling and distributing your assets, making healthcare or end-of-life decisions and providing for family and loved ones.

A well-designed estate plan can also protect your financial legacy through strategies that preserve wealth and minimize tax consequences.

What Does “Estate Planning” Mean For Individuals And Families?

An estate plan is a clear roadmap for you and your family to ensure your wishes and instructions are carried out when you die or are unable to make decisions.

Making these decisions in advance and in a legally enforceable way gives you and your family peace of mind, confidence and clarity that choices about your assets, health, end-of-life care and your family’s financial security are sorted, leaving nothing to guesswork. Estate planning for individuals and families anticipates these contingencies and more.

Why Is It Crucial To Have An Estate Plan In Place?

With an estate plan, you’re taking complete control today of an uncertain future. A thoughtfully prepared estate plan is a profound gift to your family. It spares them conflict, administrative red tape and unnecessary expense in your absence.

Many people don’t like to have their thoughts linger on illness and death. However, making hard decisions now about your finances, property, business, health and your family’s future avoids the confusion and frustration your heirs and beneficiaries will experience later if you have no plan at all.

What Are The Potential Consequences Of Not Having An Estate Plan?

Not having an estate plan leaves you and your loved ones unprotected and vulnerable on many fronts. If you fail to make essential decisions about your estate, someone else will have to. Maybe that’s someone you wouldn’t have chosen or who wouldn’t honor your wishes.

If you die without a will or estate plan, your estate will be subject to Arkansas’s laws of intestate succession. Under these laws, the state decides who among your closest living relatives inherits based on an established hierarchy.

Depending on your family dynamic, intestate succession could distribute assets to children or relatives you never contemplated or in an amount you didn’t intend. Friends and your favorite charitable organizations wouldn’t even factor into the equation in this scenario.

Without an estate plan, the majority of your assets must go through probate. This process could take upward of a year or more, during which time your heirs will incur attorney fees and administrative costs. Also, the court would have to appoint a fiduciary to administer the estate because you failed to name an executor. Their fee would also be paid out of the estate’s assets.

Not having an estate plan has other consequences, including:

• Disputes among family members regarding inheritance
• The court appoints someone you didn’t choose or know to make financial and medical decisions on your behalf if you’re incapacitated
• A court-appointed guardian for your minor children, rather than someone you elect

How Does Estate Planning Help Reduce Taxes And Avoid Probate?

Estates in Arkansas with less than $100,000 and no real estate can bypass probate. Also, Arkansas has good news for estate tax planning: there are no state or inheritance taxes, and the federal estate tax may only apply if your estate is worth more than $13.99 million.

Concerning reducing your tax burden and circumventing the hassles of probate, you have options:

• Creating a revocable living trust that transfers assets to beneficiaries during your lifetime
• Making tax-free annual gifts of up to $19,000 and unlimited tax-free transfers to a spouse
• Making designations for life insurance, investment accounts, retirement accounts and bank accounts that transfer assets directly to your beneficiaries upon your death
• Using a transfer-on-death deed to transfer real estate directly when you die
• And more…

What Are The Key Components Of An Estate Plan?

In Arkansas, the key components of a thorough estate plan would include:

• Last Will & Testament designating an executor, the distribution of your assets and a guardian if you have minor children
• Living Trust that grants you the power to manage assets before and after death while bypassing probate entirely
• Financial and Healthcare Powers of Attorney designating someone to make your financial and medical decisions if you’re not able
• Healthcare Directive (Living Will) specifying your wishes regarding medical care or end-of-life decisions if you’re incapacitated
• Up-to-date beneficiary designations naming your beneficiaries on bank accounts, retirement accounts and life insurance policies

Secure Your Future By Starting Your Estate Planning Journey Today

If you’ve been thinking about creating an estate plan but you’ve procrastinated, consider speaking with a reputable estate planning lawyer. You don’t want to leave your future or your family’s security to fate. Contact or call John Flynn at (501) 819-8090 to schedule a consultation.