5 Things Everyone Needs to Know About Estate Planning
The third week of October is National Estate Planning Awareness Week, and while there is never a bad time to get started on your estate plan, there really is no better time than the present. Many people think estate planning is for other people, or something that they will do in the future: After they accumulate more assets, when they are elderly, when they feel ready. Estate planning is for everyone. Estate planning doesn’t have to be complicated and, believe it or not, it can even be fun. Here are five things to know about estate planning to get you started:
1. Estate Planning Is About More Than Money
When people hear the term “estate,” they often picture something along the lines of the country manor house where the British Baking Show is filmed. In legal terms, however, your estate is just everything you own, from your home and bank accounts to your personal property, such as your car, your guitar, and your scuba gear, to your digital assets. Estate planning also delegates the people you want to be in charge of important things on your behalf:
- Who will make your medical decisions if you cannot?
- Who will manage your finances during incapacity?
- Who will care for your children?
- Who will receive your assets when you are dead?
A comprehensive estate plan provides guidance both during your lifetime and after your death.
2. Beneficiary Designations Matter
One of the most common estate planning mistakes is failing to review beneficiary designations on nonprobate assets. Washington law, at RCW 11.02.005, defines “nonprobate assets” to mean “those rights and interests of a person having beneficial ownership of an asset that pass on the person’s death under a written instrument or arrangement other than the person’s will.” Under Washington law, nonprobate assets include:
- a right or interest passing under a joint tenancy with right of survivorship
- joint bank account with right of survivorship
- transfer on death deed
- payable on death or trust bank account
- transfer on death security or security account
- deed or conveyance if possession has been postponed until the death of the person
- trust of which the person is grantor and that becomes effective or irrevocable only upon the person’s death
- community property agreement
- individual retirement account
- a bond, or note or other contract the payment or performance of which is affected by the death of the person.
These assets pass directly to the named beneficiary, and it is important to be aware of your beneficiary designations. Review beneficiary designations after major life events such as marriage, divorce, the birth of a child, or the death of a loved one.
3. Planning for Incapacity Is as Important as Planning for Death
A will or revocable living trust can address how your assets are distributed after you die, but there is an important part of estate planning that involves appointing fiduciaries with authority to act on your behalf while you are alive. While everyone eventually dies, you are statistically more likely to experience a period of diminished capacity, disability, chronic illness, or cognitive decline before death than to die suddenly. This is one of the strongest practical arguments for having durable powers of attorney, health care directives, and incapacity planning in place, not just a will or revocable living trust.
4. Parents Need to Name Guardians for Minor Children
For parents of young children, naming a guardian may be the single most important part of an estate plan. Without clear instructions, a court will decide who will care for your children. By designating guardians in advance, you provide guidance and reduce uncertainty for your family.
5. Taxes May Impact Your Estate
Federal estate tax, with its current $15 million exclusion amount, affects only a small percentage of estates. Washington estate tax, with its $3 million exclusion amount, impacts more estates. However, taxes can still be an important planning consideration even for estates with no estate tax liability. Capital gains tax and income taxes should be considered as part of an estate plan, as well as accounting for how debts, administrative expenses, and other liabilities will be paid.
Final Thoughts
Estate planning is an act of care. It allows you to reduce uncertainty during difficult times, make things easier for your loved ones, and ensure your wishes are carried out. Working with an attorney who can guide you through the estate planning process is one of the simplest ways to make estate planning easy and understandable.
The Estate Administration Lawyers at Beresford Booth can help you navigate even the most challenging estate disputes or probates. Contact us at info@beresfordlaw.com or by phone at (425) 776-4100 to see how we can help.