Why? Why? Why? 3 Reasons To Plan

Do you really need an estate plan?  Is it really that important?  In a piece contributed to Forbes, Certified Financial Planner® Joel Johnson describes the three main reasons individuals create estate plans:

1. Minimizing probate fees and taxes after death.  There are many tools available to transfer assets outside of the probate process such as designating homes, cars, and bank accounts to transfer automatically upon one's death, setting up beneficiaries on retirement accounts and insurance policies, and transferring assets prior to death.  While Indiana and Ohio do not collect estate taxes, gifts during life and irrevocable trusts can be utilized to avoid federal estate taxes for large estates.

2. Protecting assets during life.  While Johnson's piece specifically refers to planning ahead for the cost of a nursing home (often referred to as "Medicaid planning"), this point can be expanded to include protection of one's interests during life through the use of financial and medical powers of attorney.  While Medicaid planning can be an important part of an estate plan, determining who will handle your financial affairs and medical decisions in the event that you are incapable of doing so is a crucial function of an estate plan as well.

3. Controlling assets.  Controlling how one's assets will be distributed after death is typically the main goal of an estate plan.  In order to have confidence that your assets will be distributed as you wish upon your death, it is imperative that you establish some sort of estate plan.  Without an estate plan, you relinquish control over your assets which often leads to court and familial battles that are less than ideal.