estate planning

The Importance of Estate Planning

Paraphrasing a quote by Benjamin Franklin, nothing is certain but death and taxes. And it’s these certainties that provide a strong argument for a sound estate plan.

Many people devote more time planning a vacation, deciding which car to buy or choosing a dinner spot than they do to estate planning. Although acknowledging your own mortality and planning what happens to everything you’ve worked so hard for after you die isn’t as fun to think about as booking your next trip or checking out who has the best restaurant reviews, developing an estate plan is vitally important, especially for your loved ones.   

By definition, an estate plan is a collection of legal documents that protects your assets and personal property (your “estate”) and sets forth who will inherit your assets after you’re gone or how you want your health and financial decisions handled if you’re unable to do so for yourself during your lifetime.

Many people assume that estate planning is only for the rich. This is not the case. You don’t have to have a mansion and millions of dollars in the bank to warrant an estate plan. In fact, not having an estate plan can have a long-lasting, costly impact on your loved ones after you die. The following are reasons you should consider an estate plan:

An Estate Plan Protects Beneficiaries

Estate planning was once considered something only individuals with high net worth needed. Today, however, many middle-class families need to have a plan in place in case something happens to the family’s breadwinner or breadwinners.Whether it’s a second home or a stock portfolio, an estate plan designates who you want to receive what. Without this, the courts will often decide who gets your assets. This process can take years, rack up hefty legal fees and get ugly.

An Estate Plan Protects Young Children

Be prepared for the worst, but hope for the best. Nobody contemplates dying young, but if you have young children, you need to prepare for the unthinkable. In the event you and your spouse both die, you’ll want to ensure your children are cared for in the manner of which you both approve until they are 18. A will names these guardians and keeps the courts from stepping in to decide who will raise your minor children.

An Estate Plan Protects Heirs from a Hefty Tax Burden

Creating the smallest tax burden when assets are transferred to heirs is an essential part of estate planning. Estate planning can enable couples to reduce much or even all of their federal and state estate taxes and state inheritance taxes. Without a plan, your beneficiaries could end up owing Uncle Sam a lot of money.

An Estate Plan Eliminates Family Messes

We’ve all heard the saying, “Money brings out the worst in people.” Unfortunately, when someone with money/assets dies, it can bring out traits and behaviors in family members never expected. Squabbling over who deserves what or who should be in charge can get ugly and end up in court with family members pitted against each other. An estate plan will stop these fights before they start. You will choose who controls your finances and assets if you become mentally incapacitated or after you die in the manner you’ve intended. It can also help you make individual plans, if necessary, if, for example, you need to make arrangements for a child with health problems.

Thoughtful planning now can help minimize taxes and probate fees, and ensure your loved ones will be taken care of and the legacy you leave behind is the one you want.

Talk to a financial professional to learn more about the importance of estate planning and partner with other professionals to help you develop a plan. Once your estate plan is in place, remember to periodically review and update your existing plan to account for law changes and life changes such as marriage, divorce or the birth or death of a family member.

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