57% of American adults do not have an estate plan. One of the top reasons for that is the fact that wills and trusts force people to confront their mortality, which is an uncomfortable idea for many people.
But estate planning is one of the most important aspects of financial management. It helps make sure that everything that you’ve worked so hard for goes precisely where you want it to.
Estate planning isn’t for rich people only either. Everyone needs it to ensure that their affairs are settled smoothly after they’re gone.
In this post, we highlight some reasons why estate planning is essential.
What Is Estate Planning?
Estate planning refers to the process of anticipating and preparing for the management and disposal of your estate in the event that you become incapacitated or die. A typical estate planning process includes bequeathing your assets to heirs and settling estate taxes.
When setting up an estate plan, it’s best to work with an attorney with experience in real estate law.
Estate Plan Basics
A will is the most basic part of a real estate plan. The will outlines how assets will be distributed to beneficiaries and establishes your final wishes. Besides, your will may also outline what arrangements you envision for your burial, as well as who will be the guardians for any minor children.
All estate plans include a will. Each spouse should have their own. For blended families, there are different types of trusts that may prove more beneficial than a standard will.
What Are the Benefits of Estate Planning?
Taking the time to create an estate plan has plenty of advantages. Let’s look at some of them.
You Get to Provide for Your Loved Ones
Families of people who die without an estate plan tend to get less than they would have if there was a plan in place. Worse, it takes them much longer to get it. That often leaves your family in limbo, and the money they get in the end may not even be enough to cover bills and other expenses.
An estate plan ensures that your family doesn’t fall apart as a result of financial strain following your death.
It Helps Protect Young Children
If your children are still young, the thought of them suffering in the event of your unexpected death can be distressing. That’s why you need to prepare early, in case the unthinkable happens. Writing a will is the best way to do so.
With a will, you make sure that your children will receive the care you approve of. You get to name guardians you can trust to look after your children until they turn 18.
You Cut Expenses
When you don’t have an estate plan, a lot of your money will probably go to court costs and attorney fees upon your death. That’s because your property needs to be distributed, your children given guardians, and your businesses dissolved. The probate process can get quite expensive, even for modest estates.
The money spent lining your attorney’s pockets and paying court fees after your death could have gone to your loved ones if you’d taken the time to make an estate plan.
You Spare Your Family the Hard Decisions
Some decisions are heartbreaking to make, particularly when they involve a loved one. For instance, if you’re in a coma or get incapacitated in some other way, who gets to pull the plug on you? Who decides how your remains will be handled?
The best way to ensure that your loved ones aren’t confronted with these decisions is to plan everything in advance. You can specify in your will how you’d like your end-of-life care handled. You can also outline clearly how you want your remains disposed of.
You Get to Reduce Taxes
Estate planning can help you adopt tax reduction strategies that ensure your family doesn’t pay too much to the IRS. You get to transfer your assets to your heirs while creating the smallest possible tax obligation to them possible.
Early estate planning can help you reduce or remove federal and state estate taxes, besides inheritance taxes. Every dollar you save on taxes is a dollar more your loved ones will have to pay for various expenses.
It Makes Your Retirement Easier
An estate plan can benefit you while you’re still alive. For instance, it can make you eligible for Medicare and other government benefits. Such benefits can help reduce your overall healthcare costs, which means more funds for your family in the future.
An Estate Plans Helps You Keep Supporting Your Favorite Cause
You may be passionate about a certain cause that your family members don’t necessarily support. To make sure that a portion of your money still goes to support the cause once you’re gone, it’s best to make your wishes clear in your estate plan.
Many people support various charitable, educational, and religious causes. Including your favorite in your will ensures that you’re still making a difference in the lives of other people after your death.
Make an Estate Plan as Early as Possible
Estate planning isn’t always a fun subject to talk about, but it’s a vital one for everyone with assets and with loved ones who depend on them. An estate plan affords you peace of mind by making sure that all your affairs are in order before your death.
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