Estate planning involves creating a plan to manage and/or distribute your estate on your death. A failure to formally lay out your wishes in this regard means the following:
A well-crafted estate plan that includes a revocable living trust, however, empowers you to determine who inherits from you, how much they inherit, and when they inherit. This is particularly useful if you will have minor children or young adults as beneficiaries. In the absence of an estate plan that says otherwise, a minor child beneficiary will inherit their full share upon turning eighteen years of age. As you can imagine, receiving a large inheritance at a young age could actually harm that child by perhaps railroading plans for continuing education, not to mention encouraging unwise spending practices. This is also often the case for young adult beneficiaries. For many young adults, they are set up for success if they receive an inheritance spread out over a number of distributions, e.g., 1/3 upon earning a Bachelor’s degree or reaching the age of twenty-five years, 1/3 upon reaching the age of thirty years, and 1/3 upon reaching the age of thirty-five years. For many young adults, wisdom and maturity develop with each successive distribution, and lessons are learned, thereby inspiring confidence in handling money and a setting them on a path toward a lifetime of success with handling finances.
A well-designed estate plan also allows your estate to avoid probate altogether. By creating a revocable living trust and funding that trust with your assets, you are empowering your trustee to manage or distribute all of your assets on your death with no court involvement whatsoever, thereby saving time and money for your beneficiaries.
Finally, a properly-drafted estate plan empowers you and your spouse to minimize or eliminate estate taxes altogether, which, depending on the size of your estate, could save your beneficiaries tens of thousands, hundreds of thousands, or perhaps even millions of dollars of your hard-earned money.