3 key advantages of creating an estate plan

October 12, 2023

Allworth co-founder Scott Hanson outlines three of the biggest ways putting an estate plan in place now can help your family down the road.

Did you know that we provide our clients with estate planning guidance?

Why do we do that?

From a financial and legal perspective, estate planning is the preparation and the execution of the forms and documents that are required to carry out your wishes in the event you are incapacitated or pass away.

Unfortunately, far too many people don’t think about estate planning until it’s too late. And that’s unfortunate because estate planning is an integral braid in the chain of your overall financial plan. The fact is that having an estate plan in place, even decades before it’s needed, not only gives you peace of mind, but it can help you to preserve your wealth right now while simultaneously protecting your heirs in the future.

I’m going to define some of the key terms involved in estate planning and then provide you with 3 of the biggest reasons why everyone should put an estate plan in place.

What is a will?

A will, or a last will and testament, is a legal document that instructs the State and your heirs about how you would like your property and other assets to be distributed after your death.

What is durable power of attorney?

Durable power of attorney is a legal document that authorizes your representative to manage your financial affairs if you become unable to manage them yourself.

What is an advance directive?

Sometimes referred to as a 'living will,' an advance directive is a legal document detailing a person’s wishes regarding care in the event they are unable to make decisions for themselves.

What is a trust?

A trust is a fiduciary agreement that’s part of a well-thought-out estate plan. It can be used to minimize taxes and hold property and assets separately for the good of beneficiaries.

What are 3 reasons you need to put a plan in place?

First, there’s the benefit of having your wishes carried out.

I’ve known people with estates worth millions of dollars who died with no legal directives in place, and the results were not merely unfortunate, the impact on family and loved ones was nothing short of catastrophic.

I’ve seen generations of once close-knit families forever dissolved due to infighting because a person procrastinated and neglected to finalize their estate plan.

And remember, you absolutely do not have to be a millionaire to have an estate plan.

You’ve worked hard, so don’t leave your legacy to chance or interpretation. Work with an advisor and an estate planning attorney to make certain that your wishes are carried out and that your loved ones, or your favored charity, or perhaps even your alma mater, are looked after in according with your wishes.

Next, an estate plan will establish and secure the oversight of your healthcare directives and even your financial well-being in the event you are unable to make important decisions for yourself.

Alzheimer’s. Stroke. Respiratory disease. Debilitating cancer. No one wants to think about these things, but they eventually touch the lives of virtually everyone. And, truth be told, right up there at the top of the list of things that most of us don’t want to consider – even ranking above thoughts of our own demise – is the thought of our own incapacitation.

And while incapacitation is an unfortunate reality for tens of millions of people, perhaps the only way to make that terrible reality worse is to become incapacitated and then be legally and financially unprepared for it.

Simply, that’s a mistake that makes an undeniably terrible event worse.

An estate plan will enable your loved ones (or other designee) to make vital decisions for you if-and-when it becomes necessary.

Lastly, an estate plan keeps “the State” from deciding who will inherit your life’s work.

Even if we’ve never met, I can assure you that you do not want “the State” deciding who will receive your assets in the event of your demise.

But that is what happens if you die 'intestate,' which means you pass away without a will.

Formal probate is the analysis and administration of assets by the State that were previously owned by a person who dies, in this instance, without an estate plan. It is the State taking charge of your life’s work, taking a percentage of assets for administrative costs (could be 10%), and then deciding who gets what out of what remains.

And importantly, while you probably can’t avoid probate with just a will, depending on the state in which you live, you likely can with a formal trust.

We at Allworth Financial long ago decided that estate planning was every bit as important to a person’s overall financial well-being as investment management, or behavioral financial guidance that helps keep people from making mistakes from which they can’t recover.

You ever notice how some families hang on to their wealth, generation after generation, while others may quickly rise and then just as quickly decline financially after a single generation passes away?

While of course there are other factors, the one thing that virtually all families have in common who manage to pass whatever wealth they accumulate down to subsequent generations is a commitment to the value of estate planning.

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