Despite what you might think, estate planning isn’t limited to only the rich and famous. In fact, your family is likely to benefit from a comprehensive plan that divides your wealth, protects your well-being and provides a compass for your family’s future.

Previously, avoiding or minimizing federal estate tax liability was a primary motivation for creating an estate plan. This isn’t as critical for most people now that the Tax Cuts and Jobs Act (TCJA) has doubled the federal gift and estate tax exemption from $5 million to $10 million. (The inflation-adjusted amount for 2018 is $11.18 million.) Nevertheless, reducing exposure to federal estate tax is still significant for affluent individuals, while a wider segment of the population must consider the impact of state estate taxes.

Dividing your wealth

Estate planning is often associated with the division of your assets, and this is certainly a key component. It’s typically accomplished, for the most part, by drafting a will, which is the foundation of an estate plan.

With a valid will, you determine who gets what, where, when and how. It can cover everything from the securities in your portfolio to personal property, such as cars, artwork or other family heirlooms.

In contrast, if you die without a will — referred to as dying “intestate” — state law will control the disposition of your assets. This may result in unintended consequences. For example, children from a prior marriage may be excluded if state law dictates that all assets are to go to a surviving spouse.

In addition, you’ll need to name the executor of your estate. He or she will be responsible for carrying out your wishes according to your will. Your executor may be a professional, a family member or a friend. Also, designate a successor in case your first choice is unable to handle the duties.

Understanding probate

If your estate plan includes only a will, your estate will most likely have to go through probate. Probate is a court-supervised process to protect the rights of creditors and beneficiaries and to ensure the orderly and timely transfer of assets. The complexity and duration of probate depends on the size of your estate and state law.

Be aware that certain types of property aren’t subject to probate or controlled by your will. For example, if you own real estate as “joint tenants with rights of survivorship” (JTWROS) with your spouse, the property automatically passes to your spouse upon your death. Frequently, a couple will own a principal residence as JTWROS or, in those states that permit it, as “tenants by the entirety,” which is in essence a form of JTWROS available only to married couples.

Furthermore, if you transfer assets to a living trust, those assets are exempt from the probate process. Thus, a living trust may supplement a will, giving heirs fast access to funds.

Protecting your well-being

An estate plan can help ensure that your long-term health care is handled in the way that you wish. Notably, you can create a health care power of attorney. It grants another person ― for example, a family member or a friend ― to act on your behalf in the event you’re incapacitated. A power of attorney may be coordinated with a living will specifying your wishes in end-of-life situations and other health care directives.

Providing a compass

Finally, an estate plan can accomplish a variety of other objectives, depending on your preferences and circumstances. If you have minor children, name a guardian in your will in the event of your premature death. Without such a provision, the courts will appoint a guardian, regardless of your intent.

Your estate plan can also protect against creditors, primarily through trusts designed for these purposes. Accordingly, while trusts were often seen mainly as tax-saving devices in the past, they can fulfill a multitude of other roles.

There is one last document that ties up some loose ends. Although a “letter of instructions” isn’t legally binding, it can express your wishes regarding numerous matters ranging from burial arrangements to the religious upbringing of children. It may also provide an inventory of your assets and their location.

Let the planning begin

Now that the need for an estate plan is clear, don’t delay any longer. Contact your attorney or estate planning advisor to begin the process or if you have any questions.

Sidebar: Consider your current life circumstances

Of course, every estate plan is different. Yours should be geared to your personal situation. However, some basic principles may apply across the board, especially when your current status is taken into account.

For example, suppose you and your spouse are raising a young family. Besides naming a guardian for your children, you may acquire a life insurance policy for your family’s protection. Because premium costs are based on age, among other factors, doing so can be relatively inexpensive to obtain the coverage you need.

Conversely, if you’re at or nearing retirement, the need for life insurance diminishes. Instead, you may consider long-term life insurance that will absorb some of the costs if you’re forced into an extended stay at a nursing home or other facility.