If you want your estate to be protected for your loved ones, as nearly everyone does, then you must have an estate plan. Without estate planning, your family will likely face overwhelming tax burdens, as well as other unwanted consequences. You may also be leaving many of the decisions regarding your estate to the court instead of making them yourself.
What is estate planning?
Estate planning is the way you prepare yourself and your family for what happens after your death. Estate planning also allows you to plan for unexpected incapacity. Planning for the future is critical for everyone, regardless of the size of your estate or the size of your family. Planning ahead gives you the opportunity to specify who will inherit your property after your death while helping you to reduce the taxes your estate will have to pay. If you become incapacitated, either temporarily or permanently, your estate plan can provide the protection you and your family will need if you are unable to make decisions for yourself.
Estate planning is not just for the wealthy
A very common misconception is that estate planning is only meant for the wealthy. This couldn’t be further from the truth. Estate planning can protect anyone who has anything they want to leave behind for their loved ones. Even the smallest estate needs to be planned in order to protect both the assets themselves, and the beneficiaries to which they will be passed. Nowadays, most middle-class families need a plan just in case the family’s breadwinner(s) are no longer around to provide. Indeed, you don’t have to be wealthy to make wise and profitable investments, which can produce assets that you want to pass on to your heirs.
Reason #1: Estate planning ensures your assets go to your intended beneficiaries
Possibly the most basic reason for having an estate plan is to keep your property from ending up with someone you don’t want to have it. The reality is, if you don’t make the decision now about who should receive your assets, the court will do it for you. The primary purpose of an estate plan is to designate which of your heirs should receive which assets. If the court is required to do this for you, it can take years to complete and often leads to ugly family disputes. Remember, courts do not automatically decide that a surviving spouse will get everything.
Reason #2: Estate planning protects families with young children
While none of us want to consider the possibility that we might die while our children are still minors, but it happens. So, you need to prepare for this dreadful possibility. This is where the last will and testament, an important component of every estate plan, is most helpful. What parent would not want to make all the decisions regarding their child’s care? In order to ensure that your children will be taken care of, in the way you see fit, you need to designate a guardian or guardians to care for them, in the event both parents die before the children turn 18. Otherwise, once again, the court will make that decision for you.
Reason #3: Estate planning can reduce estate taxes
If you want to be sure that your heirs will be not pay more than they absolutely must pay in estate taxes, then you need to have an estate plan. Another major goal of estate planning is protecting your heirs from a huge tax burden. A component of your estate plan should help you to transfer your assets to your heirs while maintaining the smallest tax burden possible. It doesn’t take major planning to reduce or even eliminate estate taxes if the right exemptions and deductions are used. But, without an estate plan, your heirs will likely be forced to pay the government quite a bit.
Reason #4: Estate planning can prevent family disputes over inheritance
Deciding how to divide your estate fairly among your loved ones can be a challenge. Unless you provide very specific instructions in your estate plan, your executor will be left to decide. Avoiding family heirloom disputes can be accomplished with some planning. Ultimately, you wouldn’t want to see your family fighting over your personal possession, after you pass on. An estate plan you can help you to avoid many of the challenges that come with distributing an estate.