What exactly is estate planning?
And how to get the process started
There is a common misconception that estate planning is something reserved for wealthy individuals. When you actually define what constitutes an “estate,” it suddenly becomes apparent that most adults would benefit from having a plan in place. An estate does not mean a 9,000-square-foot waterside mansion – it is simply an individual’s assets. For business owners, those assets may also include the business depending on how it is structured. The plan dictates the management and distribution of those assets in the event of the person passing away or becoming incapacitated.
This process of forming an estate plan should not be confused with the writing of a will, which is just one component of the plan. Furthermore, many adults do not realize that a will only governs probate assets and does not address more complicated issues. These include items like property that is owned jointly with a spouse or business partner, retirement plans or life insurance with direct beneficiaries, situations where life partners are not legally married and ownership of one or more businesses.
When should I start thinking about estate planning?
Any legal adult that has begun gathering assets (especially those without a designated beneficiary, like real estate or a business) could benefit from even a simple will. This is especially important in situations when a beneficiary is still underage and unable to legally own property; a will can effectively hold assets in a trust until the underage beneficiary becomes an adult themselves.
Marriage is another life event that typically triggers the need to consider estate planning for business or property owners because of the way it can provide a clear plan of who will receive and/or manage that asset in the event something happens.
How do I start planning?
The absolute first step in estate planning is finding an attorney who not only understands your unique circumstances and goals but is also able to help you understand what you may need now or in the future.
While there are great online services that allow individuals to create legal documents quickly and inexpensively, these typically lack the individualized care and counsel provided by a good attorney and can result in unnecessary complications or accidental omissions. Additionally, a generic service may not take into consideration state laws or regulations that need to be factored in. This becomes even more important in the small New England states where there is a greater possibility of an individual residing in one state but operating their business in the neighboring state.
While many adults may feel that drafting a will should be their top priority, there is a very real benefit to starting with either a health care power of attorney or financial power of attorney, as they provide clear guidance and an alternative to guardianship in the event of an individual becoming incapacitated or other factors. Once a power of attorney document is in place, any adult with current or potential assets should then complete a will.
What may complicate my estate plan?
Another reason to find an attorney that is a good fit for you and understands your situation is that they will be able to foresee potential complications with your estate and advise or act accordingly when drafting legal documents.
One of the most common examples is that of a blended family, as the typical flow of inheritance changes slightly when children from a previous relationship are introduced to the mix. Similarly, small businesses with loosely defined leadership roles, numerous partners or shareholders or an ambiguous succession plan would benefit from proactive clarification. Other examples of scenarios with additional complexity are digital assets like cryptocurrency or property located in several different states.
When moving from one state to another, the need to update documents is not as critical as in the case of an international move, but it certainly helps to streamline processes and eliminate confusion or ambiguity when those documents are reviewed.
While many may find themselves asking questions like, “Do I need an estate plan?” or, “How do I get started?” the answer is quite simple: If you are over the age of 18 and have a bank account, own a car or a home, then you have an estate and would benefit from making a plan with an attorney today.
Sarah Ambrogi is founder of Ambrogi Law Office in Manchester, a law practice that specializes in trust and estate law planning for individuals and businesses.