4 Reasons Why You Need An Estate Plan
Many people think of estate planning as something that only the ultra-wealthy need to worry about. In fact, estate planning is an important aspect of financial planning for just about everyone, and below are 4 reasons why.
While it may not seem like a fun use of your time (who wants to think about their own mortality, after all?), developing an estate plan is worth the time and effort – at least, if you care about what happens to your assets and/or your loved ones after you’re gone. Even if you don’t own a mansion, valuable art, fancy cars, or a big retirement account, not planning ahead could cause potentially devastating consequences for your heirs.
Here are 4 reasons why you need an estate plan – even if you’re not rich:
1.) To keep your assets from going to unintended beneficiaries.
Even middle-class families usually want to pass on any remaining assets to specific heirs. If you don’t decide who will receive these assets when you pass away, you won’t have any control over what happens to them. Without an estate plan, the courts will often decide who gets your assets – including second homes, stock portfolios, and more. This is a long, time-consuming process that can take years, and things may end up being assigned to beneficiaries that you didn’t intend. Many people assume that the surviving spouse will automatically get everything, but this isn’t necessarily the case. If you want to determine who gets what after you’re gone, you will need to arrange this in advance through proper estate planning.
2.) To protect your minor children.
No one likes to think about this, but if you have young children, you need to make sure they are protected in case something happens to you. This means naming responsible guardians in case both parents pass away before the children turn 18. Without a will to determine this important aspect of your estate plan, the courts will make this decision for you. If you want to have a say in who will raise your children in case you and your spouse both die while they are still young, you need an estate plan!
3.) To reduce the tax burden for your heirs.
Part of protecting your legacy is protecting it from creditors as well as the IRS. If you have significant assets to transfer at your passing, you will want to create a plan that minimizes the tax burden on your beneficiaries. With proper estate planning, you may be able to significantly reduce or even eliminate both federal and state estate taxes and state inheritance taxes. There are even strategies to reduce the income tax that your beneficiaries may have to pay – but without proper planning, they may end up paying quite a bit more than expected.
4.) To spare family headaches and strife after you’re gone.
Unfortunately, squabbles over estate distribution are all-too-common among even the most amicable of families. To prevent court battles and bad blood within the family, it is important to have an estate plan in place that clearly specifies beforehand who will get what, and when. You will also want to make sure that you have properly planned for the event that you become mental incapacitated and can no longer make financial and other decisions. Who will be responsible for caring for you and making sure that your wishes are respected? A well-designed estate plan will make sure that your assets are distributed in the way that you intend them to be, and that your end-of-life care is carried out according to your wishes.
Regardless of the size of your portfolio, if you want to protect your loved ones and your assets after you’re gone, you need an estate plan. Without one, your assets (and even your family) may be divided by the courts instead of by your wishes, and your heirs could face huge tax burdens on their inheritance.
Need help developing an estate plan to protect your family and your legacy? Contact us today for a free initial review of your estate planning needs! We look forward to speaking with you.