Do I Need an Estate Plan?

An estate plan, at least a good one, is so much more than just a will. And it's much more than avoiding estate tax. Even those people whose estates will not incur estate tax still need proper planning. Also, estate planning is not just for the rich. There are many non-financial issues that affect most people, regardless of wealth.

A comprehensive estate plan accomplishes many things, such as:

• Making a difficult time easier for your loved ones. A serious injury, illness or death of a loved one is extremely difficult and often traumatic. Your advance planning goes a long way to alleviating additional problems.

• Giving you the substitute decision-makers of your choice. You choose the people you want to make medical and personal care decisions for you. You choose the people you want to manage your financial affairs. You choose the executors and trustees you trust to carry out your instructions for the care of your children. You choose the person who will raise your children if you and your spouse are not able to.

• Protecting your children and spouse from the bad results of the "default will" that Illinois provides its citizens. You can read it here.

• Making sure your spouse or some other responsible adult retains financial authority over your children until they are mature enough to manage their own affairs. Read the article "Revocable Living Trusts: Not Just for the Rich" for a story about what can happen in a family when a child knows he will receive his inheritance on his 18th birthday.

• If you are married with children from a prior relationship, a good estate plan will provide for your children and your spouse in the proportions and according to the arrangements that you want, and avoids accidentally disinheriting your children from a previous marriage.

• Avoiding estate tax if your estate is large enough to incur tax. Right now, estates under $5 million in value will not incur federal tax, but Illinois taxes estates larger than $3.5 million. These exemption amounts may drop to only $1 million or even lower in the near future. Middle-class people are often surprised to discover they have a taxable estate. When you factor in a family home with a paid-off mortgage, a retirement account, a few investments, and life insurance, it adds up. Aside from that, we know the tax law is going to change, and your assets are likely to increase in value, so if your estate is not taxable now, it might be in the future.