When you hear the word “estate,” you often think of properties, mansions, and sprawling grounds; but owning one doesn’t require a huge fortune. The term ‘estate’ refers to all the property an individual owns, such as cash, cars, real estate, and other assets.
Sadly, estate planning is often the most neglected aspect of financial planning. The idea of planning how to transfer your assets to your surviving loved ones after you pass away can make you feel uncomfortable. As a result, you choose to delay the estate planning to prevent yourself from entertaining the idea of ‘death.’ This explains why millions of people don’t have a will or even an estate.
Those who know understand the importance of having an estate plan turn to estate lawyers to protect their assets and provide support and financial stability for their surviving families. This also gives them peace of mind as it gives them more control over the transfer of their assets instead of allowing the state to handle everything.
Many people confuse a will with an estate plan. A will is simply a document that states your wishes concerning property distributions. On the other hand, an estate plan deals with legacy wishes and asset distribution and helps you and surviving heirs pay less in court costs, taxes, and other fees. While every person with assets can create a will, not everyone can have an estate plan. It depends on the size of the estate and potential factors, such as the arrival of a child, privacy concerns, philanthropic goals, business succession, and other special circumstances.
If you plan to do some estate planning, it’s important to know how it can benefit you and your surviving loved ones in the event of premature death. With that in mind, here are reasons why estate planning is important.
It protects beneficiaries
Most people assume that estate planning is limited to individuals with a high net worth. This misconception is certainly not true because even middle-class families can do estate planning in case something happens to their breadwinner. After all, you don’t need to be super-wealthy to perform well in real estate or the stock market; both of these generate assets you’ll need to transfer to your heirs.
Failure to plan who claims your property after you pass away means you will lose all control of whatever happens to it. The primary component of estate planning is assigning heirs to remaining possessions or everything of value, such as investments, insurance, antique items, stock portfolio, or vacation home. Without it, the judge will decide who receives your assets, a complex process that takes a lot of years and money and can even turn ugly. The judge won’t know which family members deserve to acquire a piece of your asset and which ones don’t deserve access to your possessions.
It protects the minors
Nobody wants to die young, but if you still have small children under your care, you have to consider the unthinkable. To ensure your young children will be properly cared for, the estate planning will require you to identify the guardians in case you pass away before the children reach the legal age.
Without a plan, the court will decide who raises your children. Your kids may end up in child protection services while the judge decides who will be the guardian, which can be a lengthy process. So why leave the decision to the courts if you can do it yourself at an earlier time. Surely, no parent wants to leave the decision to the court about who will raise their kids without their input.
It protects your business
If you’re a business owner, you have to detail the transfer of operations management to your potential successor and discuss how you plan to organize the finances after the transition. Dictating how you plan to hand down the business will lessen the confusion and ensure the right person will carry on your legacy and the business.
It reduces expenses
Most of your money will go to court costs and attorney’s fees if you don’t have an estate plan. Without an estate plan, you’re allowing the courts to handle everything, such as the business dissolution, guardianship, and property distribution. It also includes the tax obligations your surviving family will face for paying bills and other unexpected expenses.
Deciding who inherits your assets after you pass away can give feelings of discomfort. Who wants to talk about death anyway? Estate planning may not be as fun as planning your summer vacation, but it can save you from all the devastating consequences when transferring your assets.