Most people hear the term estate planning and think of the ultra-wealthy type with family money that could last generations upon generations. Yet, they believe it isn't for them.

However, estate planning isn't just for the lavishly wealthy. It's a very comprehensive plan with some particular goals regarding how your assets should be handled if you've become mentally incapacitated or pass away unexpectedly.

In this article, we're going to discuss what's typically involved in estate planning. We will also discuss what the primary goals of estate planning are. This should help you better understand what it takes to plan for your future and your family's future.

Keep reading to learn more. 

What Exactly Is Estate Planning?

Estate planning is something that anyone over the age of 18 can benefit from. Estate planning especially helps people who have assets, such as a business, property, or vehicles, that they want to be handled in a specific manner when the time comes.

Essentially, the term estate is defined by anything and everything contributing to your net worth as an individual. This would include any land or real estate you own, possessions such as vehicles, artwork, precious gems, etc., financial securities, cryptocurrency, stock shares, and other intangible assets, and of course, the amount of money you have in your bank account (or accounts).

The total value of all of these things is what makes up an estate, and they become very much relevant when three major life events occur: 

• When or if you have an unforeseen financial difficulty

• When or if you become mentally incapacitated

• When you pass away

Therefore, when you plan for your estate, you're planning for future scenarios that could leave your entire net worth in the hands of the Alabama probate court.

When you plan your estate, you're also naming an executor or a durable power of attorney (DPA) and beneficiaries. The executor of your estate will become the manager of your assets. They will oversee handling your affairs until your beneficiaries come into their inheritances or until the designated date of your choosing. 

Planning your estate usually involves a will with the addition of trusts, depending on whether your beneficiaries will receive specific assets, including an inheritance. But, of course, your last will and testament are arguably the most essential part of your estate plan. These instruments declare how you want all of your assets to be distributed among your family.

The Most Common Goals of Estate Planning

Suppose you were to ask different people about their final will and testament to what they're planning for. In that case, you might get many different answers. However, many of the goals for estate planning are almost always the same.

The most common goals for estate planning are as follows:

To Ensure That Your Affairs Are Handled Appropriately

As mentioned earlier, part of estate planning is choosing an executor or durable power of attorney who can step in should you become mentally incapacitated or pass away. This person's responsibility will then be to handle all your affairs according to your wishes.

By choosing someone you trust, you're ensuring that all of your affairs will be cared for. This may include your healthcare, the financial concerns for your family, appointing a guardian for your children, and related decisions. 

To Provide For Your Family

Ensuring that your family is taken care of is arguably the most essential part of your estate planning. 

Of course, everyone has their own preferences for asset distribution and inheritances. Still, the entire point is to ensure that your children and current spouse's proper arrangements are made (if applicable).

Without an estate plan, many of your assets will pass through the state's inheritance laws. This could mean that your assets and money are unevenly distributed and against your wishes. 

To Help Mitigate or Avoid Probate Court

Avoiding probate court in Alabama is another reason why individuals establish wills and living trusts. If you were to pass on intestate—as in, without a will—all of your assets would go through probate court to determine how they would be distributed.

Of course, if you only have a will, the probate court will still be involved to review it and figure out how to distribute your remaining assets and how your entire state will be taxed. This is why many people use trusts and their wills to establish who will be left to avoid the probate process.

The probate process in Huntsville, Alabama, can take up to six months or longer, depending on the size of your estate and whether anyone comes forward to contest the will. It also can be a costly process in some cases, which is why minimizing the need for probate court for the sake of your loved ones may be necessary

To Ensure That Your Last Wishes Are Carried Out

Part of estate planning is also declaring your last wishes for your funeral and burial and your assets.

Leaving behind clear instructions and arrangements for your last rites can put your family at ease. The same goes for particular possessions or business holdings. 

For example, maybe you want a specific charity to inherit your shares or a certain amount of money. Or perhaps you own a classic antique car that you want to be donated to a car museum—without a proper estate plan, these things may not happen.

To Reduce Estate Taxes as Much as Possible

A primary concern many individuals should have is the taxation of their assets in the absence of estate planning. Federal estate tax takes around 40% of the value of all your assets combined at the time of your passing, after taking into account certain deductions.

Fortunately, Alabama does not impose any estate taxes or inheritance taxes on a state level as some other states do. However, suppose part of your estate is outside of Alabama. In that case, they may be subject to the state taxes of the addresses they fall under.    

To Protect Your Assets

The assets you build up over time are a result of hard work and intelligent business decisions. However, significant life events, including divorces and lawsuits, can end up taking away from the size of your estate.

Additionally, how your assets are handled can also leave them vulnerable to creditors and other liens. But, once again, this is what makes living irrevocable trusts such a valuable addition to your last will and testament.

Essentially, estate planning protects your assets by potentially limiting their exposure to these problems and ensuring they end up in the right hands.  

To Ensure That Any Minor Children Have a Suitable Guardian

Estate planning is especially critical when you have children under the age of 18. It allows you to declare who you would want to become their guardians if you experience a health situation or pass away before expected.

Without the proper estate planning, it'll be up to the probate court to determine who raises your children without the knowledge of your wishes or opinions. Worst case scenario, your children could end up in the foster care system if the courts cannot find them a suitable guardian. 

To Ensure Privacy

Privacy is also a primary goal for estate planning, especially among aging couples. This is because there has been an uptick in fraudulent scams and solicitations against elderly individuals to get a hold of their life savings and other assets.

Having an estate plan can help protect you and your spouse as you age and become susceptible to these types of scams.

To Ensure You're Protected During Health Events

While most people associate estate planning with death, that is not its sole focus. It's also necessary to plan for significant health events that could leave you mentally incapacitated or in need of long-term health care. 

Part of planning for possible health issues involves declaring health directives and appointing a durable power of attorney. This should be someone you can trust to make the right medical decisions according to your wishes. It also includes having a business succession plan in place and an insurance plan to have the resources you need to get healthcare and make sure that any business activity is taken care of.

Estate Planning is Essential for Families in Alabama

As you can see, all of the goals listed above are essential to protect your assets and family from the various situations that can negatively affect them during times of distress and grief. 

Estate planning takes a decent amount of time and energy and can also become rather costly. However, when done correctly, it can save you and your family money and time, in the long run, should you pass away unexpectedly or become mentally incapacitated.

With the help of a licensed Huntsville estate planning attorney like Sarah S. Shepard, the wills and estate planning process will go much smoother. You can rest assured that all of the assets you've built up and your family will have the support they need during any possible future events. 

Contact us today to get an experienced professional's help with your estate planning in Huntsville, AL, or any part of Alabama.