A lot of people think that estate planning is something only rich people do. Well, that's not entirely true. Something like this is crucial for anyone, no matter how rich or poor an individual is.
What does this term involve? It means that a person has to decide and also secure who is going to inherit all their assets after they are gone. Unfortunately, many people only think about earning money and increasing their fortune during their lifetime.
But do they ever ask themselves what is going to happen to it when they die? That's why estate planning is important. Not just for you, but for the future generations too. Check out these reasons to get more info about it!
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The Importance Of Estate Planning
You Need To Plan For Your Own Needs
As we previously stated, a lot of people think that estate planning is something you only need when you die, however, a lot of them do not realize that it is something that is going to protect both your assets and you when you are not capable of working or make any decisions for yourself.
Once you determine your cash flow needs that lead up to retirement, you have to think about the insurance that is required if you are no longer capable of providing for yourself. Furthermore, you should consider having a healthcare proxy or hiring a lawyer that is going to help you make financial and medical decisions on your behalf.
It's of huge importance to discuss these things with the people you trust who are going to make sure your needs and desires are respected if you at some point, are unable to speak for yourself.
Determine Who Is Going To Inherit Your Assets
As you've already seen, estate planning isn't just for the rich folks. In most cases, families usually have some things that they want to leave behind that are part of their estate. It can be your family house, stock portfolios, a second vacation house, precious possessions, real estate investments, etc. That's why you should consult with experienced financial advisors to see what they're going to suggest. You can always click here to get yourself familiar with further protocol and process. Just bear in mind that if something occurs to your breadwinner, your items are supposed to be inherited by the heirs of your choosing.
Namely, if you do not create an estate plan, then the court is going to be the one who will decide who is going to inherit your assets. At first glance, it may seem to be like a simple process. Well, it isn't.
Unfortunately, in these situations, family members tend to fight over this stuff and things may become very ugly and unpleasant. Hence, you must create an estate plan so that you can avoid any potential feuds among your family members.
More Reasons Why Estate Planning Is A Must!
It Goes Beyond A Will
Most people think that an estate plan is the same as will. Well, that's not true. Now, both of these things are going to provide you with instructions on how your assets and goods are supposed to be handled after you're gone, however, estate planning covers so much more:
- A durable power of solicitor to decide who is going to make financial or medical decisions on your behalf when you are no longer able to do it
- Medical directives to showcase the types of medical treatment you wish (or you do not want to) if you are not capable of outlining it
- Beneficiary designations will determine who is supposed to receive cash from annuities, life insurance policies, retirement account, and other types of financial accounts
- At least one trust to facilitate passing property to the ones who are going to inherit your assets and provide tax benefits for both your beneficiaries and you
To Minimize Transfer Taxes
If either you or your family member has earned a substantial amount of money and you want to transfer it to other members of your family or anybody else you love after you are no longer here, this whole process is going to help you create an approach to achieve that in a tax-efficient way.
Moreover, three types of taxes should be considered during the process of transferring money. The estate tax, generation-skipping transfer tax, and gift tax. Since the IRS tends to limit the amounts of money you can transfer, as well as to whom without being taxed, a high-quality estate plan is going to outline a wealth transfer tactic that will try to minimize the taxes that were owed by either you or your estate.
Protect Family If You Have Young Kids
Of course, nobody ever thinks about dying young, especially if a person has young children, but sadly, that's also something that can happen. So if that occurs, what are your kids going to do then? If you're a parent, you must be prepared for any wrong events, including your death. This also involves creating a will, which is part of estate planning. In it, you are supposed to highlight how any of your kids that are younger than 18 are going to be taken care of, plus what things in your estate will be inherited by then when they grow up.
Without a will, the court is going to decide that for you, and it will also determine who is going to look after your children when you're gone. If you want to be the one who is going to find the right guardian for them, then you should accentuate that in your will.
Philanthropy
This may be the last on your list, but certainly not an irrelevant fact. Now, if you want to set aside a certain amount of your money and spend it on philanthropic work then you need to determine how you are going to do it by consulting with an estate planning advocate.
As you can see, doing estate planning isn't as difficult as you may think it is, but still, it doesn't mean that you shouldn't plan. So it would be recommendable to read every single paragraph we wrote in this article to conclude how beneficial it is.