You don’t need to own sprawling land properties and mansions to have an estate plan. Estate planning is for everyone who wants to keep their financial affairs in order and protect heirs in case something happens to them unexpectedly. It is the process of bequeathing your valuable, and possessions to your loved ones, naming who will inherit certain properties or how much they will receive. While it may sound morbid, arranging your finances and properties is crucial to keep your family afloat and financially stable after your death. Without it, the probate will take over and place value on the assets, determine who will get the properties, and pay the existing debts and taxes. They are the main purpose of probate.
Here are the top 4 reasons why estate planning is important:
- It protects your beneficiaries.
Estate planning gives peace of mind that everything you have will be distributed accordingly to your chosen beneficiaries. This eliminates leaving your properties to the unintended heirs. It serves as a safety net to protect your children, spouse, or parents from making bad decisions, avoiding creditor issues, or becoming easy prey to outside influences. If your sole beneficiary is still a minor, the state will appoint a conservator or guardian until he/she turns into a legal adult. This involves costly legal expenses and rift in the family. With an estate plan, you can assign a trustee or a guardian to protect your child. You can also stipulate some conditions that will ensure that the inheritance will not be squandered by the potential partner of your beneficiary or get a part of it during a divorce.
- It prevents paying big taxes.
By law, all your heirs must pay taxes before they can enjoy their inheritance. Estate planning can significantly reduce the inheritance taxes or federal estate taxes by setting up a living trust, alter ego trust, or a joint partner trust. Without a plan, these taxes will cut a big portion of your wealth and become an additional burden to the beneficiaries because they need to attend to the matter. With the assistance of a trusted and experienced estate planning attorney, your heirs will not worry about it.
- It lets you choose a trustee to manage your affairs.
An estate plan is not a simple will, but a collection of important documents that protect your personal property and assets. It includes the following:
- A will that clearly identifies your heirs
- A power of attorney to help you execute financial decisions, manages your investments, pay your bills and taxes, as well as make business or legal decisions when you are not around anymore
- A medical power of attorney that will execute medical decisions on your behalf
- A trust that controls when and how the properties will be divided among the heirs
- A living will that documents your wishes or preferences.
The power of attorney has a name of a trusted person (a relative or friend) you appoint to manage your financial and legal affairs, while the health care proxy form has your consent to allow someone to execute medical decisions in accordance with what you want.
- It protects your assets.
Another vital reason why you need to have an estate plan is to protect your assets against possible lawsuits or claims. Your estate planning lawyer will help you make a comprehensive estate plan that cushions the interest of your heirs in all your properties, including electronic assets after you are gone. Adding an AB Trust or ABC Trust will protect your spouse’s assets, while lifetime trusts will ensure a good life for your other beneficiaries. By incorporating insurances and investments into your estate plan, you are providing a financial buffer to your loved ones so they can continue living their comfortable lifestyle.
Estate planning is your guarantee to take care of your family when you are no longer around them. Hiring an expert estate planning attorney to help you customize your financial affairs, will, conditions, and wishes is the key to a secure the future of your beloved family. Moreover, estate planning also executes your ‘living will’ when you lose your ability to communicate your desires. The sooner you do it, the better for everyone. Remember that preparation is still the best plan to secure the future. You wouldn’t want your family to be financially burdened when you cannot provide for them. Your estate plan will take care of everything.