It’s understandable that you might assume “estate” planning is only for people of means. The word “estate”—which conjures visions of Jane Austen-like scenery featuring sprawling mansions, rolling hills, and houses full of staff—is right in the name.
But the truth is, estate planning is a smart idea for pretty much everyone and anyone.
The thing is, estate planning isn’t just about money. It’s about having the power to make your own choices about how you want things handled and how you want to look after the people you love.
Let’s take a look at why estate planning is so important, and what goes into a smart estate plan that will protect you, your assets, and your heirs.
5 Important Reasons to Have an Estate Plan
While an estate plan will definitely provide invaluable peace of mind, that’s a somewhat vague benefit that can be hard to grasp. There are many other, more concrete benefits, however, that make the importance of having an estate plan crystal clear.
1. Keep what’s yours.
Protecting assets is one of the top reasons people decide to create an estate plan, and it’s no wonder. A lawsuit or divorce can wreak havoc, and if you don’t have a plan in place, everything you’ve worked so hard to build can crumble to the ground right before your horrified eyes.
An estate plan goes a long way toward ensuring that the assets you’ve acquired and built remain available to you and your heirs, both when you’re still alive to enjoy them and after you’re gone. There are many different types of trusts you can use to protect and manage specific assets for specific people—like spouses and children—and ensure that your family is cared for no matter what happens.
2. Look out for the people you love.
If you’re a parent, you know that once a parent, always a parent. Even if your kids are grown, you still want to do whatever you can to make their lives better. And if you have children who are still young, an estate plan is even more important to ensure that—if anything were to happen—those minor beneficiaries are not only cared for, but cared for in the way you intended.
For instance, minor beneficiaries need a guardian or conservator assigned to oversee their day-to-day needs and overall finances until they come of age. And even adults can sometimes benefit from such guidance and management. A special needs trust is a very effective way to ensure necessary care for an adult child who needs extra support. Or, you may choose to set up a trust for an adult heir who simply has a track record of making bad decisions or putting themselves at financial risk.
No one wants to have to endure the ordeal that is probate court. It’s an expensive, painful, and time-consuming process that often devolves into infighting amongst family members. If a Will is contested in probate, the process can go on for what feels like forever. And all the while the court fees will be chewing through the inheritance meant for your heirs.
4. Keep the peace.
As if losing a loved one isn’t traumatic enough, chaos often follows a death in the family if there is no estate plan in place to clearly spell out the wishes of the deceased. Planning ahead of time who gets what when can nip a lot of fights in the bud, and potentially save relationships that might otherwise have been damaged beyond repair.
5. Minimize the tax burden.
You may not be able to avoid death, but you can avoid at least some taxes. There are trust strategies that can greatly mitigate the state and federal taxes levied against an estate upon death. Depending on how you structure your estate, you may be able to greatly reduce or even eliminate many estate taxes that would apply to a spouse’s inheritance. And there are also ways to reduce the burden of inheritance taxes on other heirs.
A quality estate plan is not just a luxury available for the privileged few; it is a necessary planning tool everyone should have in their tool box. If you need help preparing or reviewing your estate plan, contact us today to ensure you have the proper documents in place to protect you and your loved ones now and in the future.
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