Estate planning is often associated with individuals who possess vast wealth or who are near end of life. But the truth is that estate planning is not just for the affluent, nor is it an end-of-life matter. Regardless of your current wealth level, engaging in proper estate planning is essential for everyone in Tennessee.
Let’s go through five compelling reasons why estate planning is crucial for everyday people in a variety of situations. Having proper legal documents in place now will help carry out your wishes and minimize the risk of conflict and uncertainty in difficult situations.
Estate Planning Helps Prepare for Incapacity
Two fairly simple, but important types of documents are powers of attorney and a living will. Powers of attorney grant certain individuals the authority to make healthcare and/or financial decisions on your behalf. A living will provides end-of-life care instructions so your loved ones don’t have to guess what your wishes are.
A power of attorney for property allows your agent to manage your financial affairs. This is especially important to have if you hold digital assets like cryptocurrency. Powers of attorney for property ought to expressly grant authority over cryptoassets.
A power of attorney for healthcare allows your agent to authorize medical care if you are unable to speak on your own behalf. For example, after a major car wreck, an important surgery may be advisable to tend to injuries. The healthcare power of attorney authorizes your agent to communicate with healthcare providers about whether to proceed with the operation if you cannot do so.
These powers of attorney are generally “durable.” This means the powers survive legal incapacitation so that your agent can actually make the decisions you want him or her to make for you.
Additionally, a living will deals with end-of-life situations. If there is no hope for medical recovery, you may have particular desires about life support and administration of medications. The living will puts your desires in writing ahead of time and informs family members and healthcare providers what to do.
Avoiding Family Disputes and Legal Battles
Estate planning plays a pivotal role in avoiding family conflicts and legal battles that can arise after your passing. Clear instructions provided in a well-drafted will and/or trust can help prevent disagreements among family members regarding the distribution of your assets.
If family members are upset about your estate plan, sometimes they may try to contest your will and/or trust. Estate and trust litigation can be very expensive and emotionally draining. And the expenses in defending against a claim may significantly reduce what your beneficiaries receive.
One way to avoid this is through the drafting of an in terrorem (no contest) clause in your will or trust. This clause effectively disinherits anyone who brings a will contest without proper cause. This acts as a disincentive to engage in frivolous litigation.
Another way to reduce the risk of a dispute is to have a revocable living trust that distributes your assets privately. While wills are public record, trusts are private instruments that pass property without court supervision. It is much harder to contest a trust than a will.
Regardless of the size of your estate, disputes can arise, and emotions can run high. But having a comprehensive estate plan in place minimizes the risk of such conflicts. By clearly expressing your wishes and intentions, and planning for potential disputes, you can help maintain family harmony and protect your loved ones from unnecessary strain.
Estate Planning Helps with Managing Small Businesses
If you own a small business, estate planning becomes even more critical because others may rely on you for their paycheck. Without proper planning, your business may face uncertainties and disruptions in the event of incapacity or death.
Estate planning documents—specifically a trust—allow you to designate a successor who will continue running the business. In order to ensure the security and continuing stability of your enterprise, a trust instrument should have an express clause granting authority to carry on business operations.
Otherwise, your business has to go through probate, and a court-appointed receiver may have to oversee operations. This can be a major hindrance and cause stress and uncertainty for your workforce.
Furthermore, proper estate planning can facilitate buy-sell agreements among business partners, protecting everyone’s interests and minimizing potential conflicts. It is important to consult with business partners and review any operating agreements when drafting your documents to ensure there is minimal risk of disputes or inconsistency.
Taking Care of Special Needs Family Members
If you have a loved with a significant disability, estate planning is also especially crucial. Creating a special needs trust allows you to provide for their financial well-being without jeopardizing eligibility for government assistance programs, such as TennCare and Supplemental Security Income (SSI).
Through proper planning, you can rest knowing that their care, medical needs, and quality of life are protected, even when you’re no longer there to provide that support yourself.
There are very specific limits on what assets an SSI recipient can hold. But with a special needs trust, you still can provide for these loved ones with special needs. The key aspect of these trusts is that they provide supplemental support. But these trusts prohibit the use of funds that would disqualify the beneficiary from government assistance.
Appointing Guardians for Minor Children
In your Last Will & Testament, you can (and should) name a guardian for your minor children. This applies whether you have a one- or two-parent home.
For two parent homes, both spouses should name a primary and alternate guardian if both parents die simultaneously or one spouse predeceases the other. If you do not name this person yourself, the probate court will decide who your minor children’s guardian will be.
Especially if you want your children raised with certain values, naming a guardian who will honor those desires is critical. Otherwise, the court may place your minor children into a home with values different than yours.
The nominated guardian is often, but does not have to be, a family member. You may wish the guardian to be a family friend, instead. The important thing is that this person is responsible and will properly care for your children until adulthood.
Final Thoughts on Estate Planning for Everyday People
Estate planning is a vital process for everyone, not just the affluent. There are a variety of difficult situations that can happen to us in this life. But making your wishes made known through properly drafted and executed legal documents will minimize hardship on your family.
Regardless of the size of your estate, making your estate plan maximizes the likelihood that your wishes will be honored, your loved ones will be provided for, and potential conflicts are avoided. Making these plans us an investment. But it does not have to be an exorbitant expense to get basic documents drafted and executed.
Connell Law, PLLC is here to provide residents of Middle Tennessee with estate planning and small business legal services. Reach out today for your free consultation. Plan today for a more peaceful tomorrow.