The average person puts a great deal of time planning for a vacation or deciding which car to purchase but when it comes to setting their affairs in order, many people are slack. While thinking about death is certainly not as fun as planning a vacation, without a solid estate plan in place, unintended people can inherit assets you’ve spent your life accumulating.
Estate planning isn’t just for the rich and wealthy. It’s for everyone who cares about ensuring a seamless transition for their loved ones after passing away. That’s why this post will explore why estate planning is important so you can promptly put one in place.
Protection of Beneficiaries
Many people think they have little to pass on to their heirs – and you may be one of them. Just take a moment to itemize your valuables – family home, vacation home, real estate investment, insurance, and treasured possessions. You’d be surprised by how much you own.
If death comes before making an estate plan, the probate court steps in to distribute your assets in a way it deems fit; and more often than not, it would not be in line with your desires.
Preventing Family Mess
Bob Marley died in 1977 without a will. This led to a heated battle for his estate between his widow and 13 children. In addition to that, Bob’s lawyer and accountant persuaded Rita to forge documents just to gain control over Bob’s entire estate.
Unfortunately, the battle rages on as Bob continues to be a top-earner. Between, 2013 and 2014, he made $20 million. And as recently as 2012, Bob’s estate was in a court battle with his half-brother. All of this family drama could have been avoided with an estate plan.
In more pervasive scenarios, family battles can lead to enmity and further devolve into murder, ripping the family apart.
Everyone wants to be there for their children to nurture, provide, and train them as they transition into adulthood. But life sometimes happens and parents leave their kids. Nobody wants this to happen, but it’s wise to be prepared for the unthinkable.
An estate plan allows you to designate people that will serve as your children’s guardians until they turn 18. Without that information indicated in your will, the court gets to decide whom to raise your children, which may be a person you never would have approved of.
Help Heirs Avoid a Big Tax Bite
Part of your responsibility is to ensure that your assets are transferred to your heirs with the least tax burden. Through adequate estate planning, it is possible to reduce a big chunk of federal and state estate taxes, as well as state inheritance taxes. Strategies like AB trusts, ABC trusts, and revocable living trusts can help limit estate taxes. Advanced strategies are available to further reduce or even eliminate estate taxes. Without implementing them beforehand, your heirs get to pay a lot in taxes and receive a fraction of your inheritance
Preparing for Health Crisis
Just because you’re fit today, doesn’t guarantee your well-being tomorrow. In a situation where you become mentally or physically unfit, you want to ensure that you have the right person making important health decisions on your behalf.
Estate planning also involves setting a medical power of attorney in place. That person will be responsible for making medical decisions on your behalf. If you don’t have one in place, the court steps in to assign a person to make these decisions on your behalf and it might be someone you’re not pleased with.
Furthermore, declining health might make you unfit for making financial decisions. By assigning a financial power of attorney, you get to put someone you trust in charge of your finances pending the time you either recover or die. Failure to assign one means that the court decides on a person to manage your assets.
Failing to have an estate plan leaves the responsibility of the distribution of your assets to the probate court. Probate is a court-supervised process of validating your will (if you made one), evaluating your assets, paying off pending debts and taxes, and then distributing the remaining to the ‘rightful heirs’ as deemed by the court.
The probate process is time-consuming, taking at least 6 months. This makes the process very stressful and can result in endless family strife as disagreement ensues.
Moreover, this process is expensive. The court appoints a personal representative or executor of your estate, who is entitled to administrative fees of about 5% of your asset. Also, the attorney hired by the personal representative to oversee the legal proceedings gets a minimum of about 5% of your asset in legal fees. That’s already 10 % off the total asset before distribution to the beneficiaries.
Although a simple will doesn’t evade probate, more advanced estate planning like revocable trust, joint assets, and beneficiary designation can help. This means your heirs get lots more.
Protecting your assets is a crucial component of effective estate planning. This will help protect your property from any lawsuit in the future. For many people – especially those in industries flush with litigation like real estate, commercial or medical field – their property comes vulnerable if a creditor shows up. Without a prior estate plan in place, it’s usually too late to protect their assets.
With a comprehensive financial and estate plan, it is possible to secure your assets from creditors during your lifetime and after your death, enabling your beneficiaries full enjoyment of their inheritance.
AB Trusts, ABC Trusts, lifetime trusts, and electronic assets are some common ways of assets protection.
If you desire to protect your assets and loved ones when you can no longer do it, a comprehensive estate plan is non-negotiable. Without one, the court steps in to make decisions on your behalf. This can result in strife, huge tax burdens, and stress among your heirs. Now is the right time to act and we can help streamline the entire process for you. Contact us today!