There’s a common misconception that estate planning is only for the wealthy. In reality, estate planning benefits everyone, regardless of their wealth. This procedure helps prepare the appropriate documents to protect you and your family after an unexpected event. Families that disregard estate planning end up getting less as it takes much longer for them to receive benefits.
An estate plan includes all tasks to be executed after the individual’s death or incapacitation to manage their asset base. This comprises the settlement of estate taxes and bequest of assets to heirs. With a stable estate plan in place, you can focus on supporting each other through the tough time instead of getting lost in the paperwork.
Before we learn about the benefits of estate planning for you and your family, let’s understand what the procedure really is.
What is Estate Planning?
As we mentioned, estate planning prepares all tasks to be executed after an individual’s death or incapacitation to manage, preserve, and distribute their asset base. That includes houses, cars, stocks, artwork, life insurance, pensions, and debt. How you create your estate plan depends on your reason, whether it’s funding children’s or grandchildren’s education, donating to a charitable cause, providing for a surviving spouse and children, or simply preserving family wealth.
If you’re considering an estate planning service, the first step involves writing a will. Then, you can focus on other aspects of estate planning, such as:
- Establishing a guardian for living dependents
- Setting up trust accounts in beneficiaries’ names
- Setting up funeral arrangements
- Naming an executor to oversee will terms
- Establishing annual gifting to qualified charitable organizations
- Creating beneficiaries on life insurance, IRAs, and 401(k)s
- Setting up a power of attorney (POA)
Benefits of Estate Planning
Here are eight ways you and your family can benefit from strategic estate planning.
First and foremost, an estate plan ensures that the individual’s property goes to the right beneficiaries. By outlining the exact requirements about how to distribute the assets and who is in charge of executing the will, a concise estate plan will prevent any beneficiary mismanagement and wrongful division of your property. If you have created a detailed and informative will, the court will not decide on these guidelines, allowing you to maintain peace and fairness in the family.
Immediate Family Care
With the right estate plan in place, you can guarantee that your family receives immediate care at the right time. In addition, it provides enough financial compensation for your spouse and other immediate family members to survive and fulfill their family duties without struggle.
However, if you have children and both you and your spouse pass, the estate plan will also include the name of the appointed guardian to manage and take care of your children and assets. If your estate plan does not include this information, the matter will be left up to court.
Without the right estate plan, your family will have to suffer through high attorney fees and court costs, which are simply burdens they don’t need in such a difficult time. In addition, ignoring the importance of an estate plan will lead to the court deciding all matters regarding the distribution of your assets, dissolution of your business, and guardianship of your children.
This process is called probate, and it can be costly, even for the most modest estates. Instead of giving that large amount to an attorney, save it for your immediate family and opt for estate planning to avoid probate.
Smooth Business Operations
Estate planning is more critical for business owners than anyone else. Remembering to create a promising estate plan ensures that your business doesn’t fall apart after your incapacitation or death and leaves your family to deal with the financial burdens.
Estate planning will detail the duties of your spouse and children regarding your business while also stating what’s to be done with the company after your death or incapacitation.
Tax planning is an important aspect of estate planning, and it’s worth noting that it allows you to save hundreds of dollars in taxes. In addition, with the correct estate plan, you can guarantee that your family will pay fewer taxes in the future, so it’s best to begin tax planning as soon as possible.
Of course, it’s not a pleasant situation to imagine, but it’s entirely possible that both you and your spouse pass away or get incapacitated at the same time. In such cases, the first question to ask is who will take care of your children financially, emotionally, and physically.
When that question is left unanswered, the court takes matters into its own hands and appoints a guardian for your children. Until the guardian is appointed, your children are placed in child protective services (CPS) while the court comes to a conclusion. Unfortunately, even after appointing a guardian, it’s not always guaranteed that they will be fit to raise and support your children in the way you prefer.
Another matter that is left up to the court, if left undecided by the individual, is the executor or trustee of your estate. You need someone that will fairly execute all the requirements of your will and other financial statements after your passing to ensure each beneficiary receives the correct compensation.
You may name this person in your estate plan to simplify the administration process and save money. Otherwise, the court will appoint a trustee for you, so you must ensure that you choose a trustworthy yet unbiased person to be the executor.
Death and incapacitation are just as incredible as life, which is why you must always stay prepared for them. Getting the right documents in order, such as your will and estate plan, can remove a great financial and mental burden from your immediate family members at the time of your passing.
It can be easy to put off document creation, such as your will or your estate plan, but they’re often quite simple and affordable to get done with. In addition, spending some time on estate planning can get rid of a long list of burdens for you and your family at the time of your death or incapacitation, so it’s best to start working on it as soon as possible.