Most people think estate planning is an old person’s game. Once you hit your 60s or 70s, that’s when you organize your affairs–right? Wrong. Please do not wait until you’re in your twilight years to plan your estate! The unfortunate reality is that we never know the exact time of our demise or incapacitation. Having your affairs in order helps you live a more full life and ensure your loved ones are protected.
A good rule of thumb is that if you have any assets (a house, a bank account, investments), you should at least have a will to avoid probate. The more assets you accumulate, the more sophisticated your plans will become. You may need to add a trust, business or nonprofit structures, or insurance products to maximize your financial impact on your heirs and legacy causes.
In this article, we cover the benefits of estate planning at every stage of your life.
What is estate planning?
Estate planning is essentially letting you have a plan in place long before you die to make sure that the right people get hold of whatever you want them to have. This entails naming specific people or organizations and detailing exactly what they would receive when you perish. However, there’s more to estate planning than just that. Here are other aspects of a good estate plan:
- Contain meticulous instructions for your care and that of your financial dealings if you become debilitated before you die.
- Specify provisions for disability income insurance to take the place of your income if you can no longer work because of an illness or injury, long-term care insurance to assist in the payment of your care in case of an extended illness or injury, and life insurance to provide for your family after your death.
- Provide details for the transfer of your business at the time of your retirement, disability, or death.
- Designate a guardian for your children’s care.
- Assist family members who have special needs without exempting them from still receiving government benefits.
- Offer aid for loved ones who might not be as responsible when it comes to managing money and needs protection from creditors or in the event of divorce.
- Minimize taxes, court costs, and redundant legal costs, which may include funding assets into a living trust, completing or updating
Why is estate planning important?
As we mentioned earlier, estate planning is not only for the wealthy. Without an estate plan in place, letting other people settle your affairs after you go will not only be messy and stressful for the people you leave behind but also costly. If you still need to be convinced of the importance of an estate plan, here are several good reasons why you should have one:
1. It protects beneficiaries
While estate planning used to be something that only well-off individuals dabbled with, these days even a modest inheritance justifies an estate plan. While middle-class individuals may be leaving behind a normal-sized home instead of a sprawling property, if you don’t decide who gets the property when you pass away, you won’t have any control over what happens to it. Without an estate plan, the courts will decide who gets your assets. This is also a tough process that could take many years to complete.
2. It will protect young children
Nobody expects to die young but if you have small children, you still need to prepare for such an eventuality. This is where the will portion of an estate plan will come in handy as this will make sure that your children are cared for properly, by letting you name guardians. Without a will, the courts will decide who will take care of your children.
3. It will protect your loved ones from expensive taxes
Another crucial aspect of estate planning is that it lets you transfer assets to your heirs without burdening them with massive tax fees. Having an estate plan will let you lessen all of their federal and state estate taxes and state inheritance taxes.
4. It will reduce family brouhahas
There are lots of horror stories of families getting torn apart when a family member with money dies and doesn’t leave a will. Such quarreling can get real messy and most times, end up in court, with family members going up against one another. Having an estate plan will let you halt fights before they get started as it enables you to pick who gains control over your assets should you become mentally incapacitated or after you die.
Benefits of Advanced Estate Planning
Your family’s welfare has always been your top priority in life and that shouldn’t change even after you’re gone. The best way to ensure that your loved ones are still taken care of in the event you pass on is to create a viable estate plan while you’re still of sound mind.
Here are the top benefits of estate planning:
1. Provide for your family
This is crucial especially if you are the breadwinner of your family. Creating an estate plan will make sure that your spouse has enough money to properly take care of the rest of your immediate family. If you and your spouse pass, an estate plan will specify guardians to take care of your children. This leaves no questions to be answered by the courts or room for any family strife.
2. Ease the burden of funeral arrangements
It can be incredibly difficult to plan for a funeral while your family is still grieving. However, you can help take that load off their shoulders by outlining in your estate plan all your funeral wishes and even set aside money for it.
3. Lets you still support your favorite cause
If you are fervent about supporting a particular cause or charitable organization, having an estate plan will let you still provide support—especially resources—long after you’re gone.
4. Plan for any disability
Let’s face it: life is unpredictable and should you ever become disabled or mentally incapacitated, having an estate plan will let you specify your instructions with regards to long-term health care.
5. Lessen estate taxes
By making an estate plan, you’ll be able to reduce the amount of taxes collected on your estate. This is beneficial for your heirs as it lets them keep more of the resources that you set aside for them, rather than Uncle Sam getting the bulk of it.
6. Establish trustees over your estate
You’ll need a point person who will have the function of the executor of your estate to ensure that your instructions are followed to a T. Your estate plan will designate this person, which saves a lot of money and will also streamline the administration procedure.
7. Help other members of your family
Aside from your immediate family, you can also direct resources to other family members like a grandchild who will be attending college or a cousin’s son who suffers from a disability. Having an estate plan will let you establish a trust to provide them with resources for their various needs.
8. Make sure your business is running well
After spending so many years building your business from the ground up, the last thing you want is to have it crumble when you’re gone. You can help make sure it is running well long after you’re gone by specifying a succession plan in your estate plan. This includes naming a successor and discussing what you want to be done with the business moving forward.
Nobody really knows when our time is up and a lot of families are caught off-guard and unprepared when death descends on a family. Make sure this does not happen to your family by creating an estate plan today.