Estate planning is deciding who will inherit what from your property and assets after you are no longer alive. Even though it is a critical issue that must never be overlooked, you will seldom find people paying attention to it. People spend more time planning to build a house, buy a car, or vacation than estate planning. Not doing estate planning on time or adequately results in friction between family members, strained relationships, and even broken family connections.
According to the East Bay Times, too many people ignore estate planning and fail to protect their assets. As a result, they intentionally jeopardize the fate of their wealth.
Thinking about when you won’t be with your family is not easier; no one likes to mull over their death. Nevertheless, it is important because it helps you make the right decisions, such as estate planning or writing a will. After all, you can’t let others decide who will take what out of your hard-earned wealth.
So, if you want to control the destiny of your wealth even when you are not alive, estate planning must be on your mind. Here are five reasons that merit estate planning.
1. To avoid probate
Probate is the process through which a deceased man’s will is validated. It is how the value of their assets is estimated, and their bills and dues are paid. Finally, the rest is given to those mentioned in the list of beneficiaries. Avoiding the long-drawn probate process after death is why you should consider estate planning.
Undeniably, many affordable probate services are available these days that help you handle wealth more confidently. Highly qualified experts at prestigious probate support firms help the executor honor the legacy of the deceased. These firms provide country-specific guidance so that you can gather the required documents and complete the process with finesse. But what is better than deciding your assets’ fate when you are still alive through estate planning?
2. Avoid estate taxes
The purpose of estate planning is to care for your loved ones even when you are not physically present among them. In part, it also entails protecting your heirs from the Internal Revenue Service.
If you don’t engage in estate planning, you might put your wealth at the mercy of the painful process of getting depleted due to payment of federal and state estate taxes. So, the amount your kids might be directed to pay to Uncle Sam becomes too much. Avoiding this loss of wealth is a great motivation for many people to engage in estate planning.
Transferring your assets in a way to reduce the tax burden on your kids is an integral aspect of effective estate planning. Through estate planning, married couples can plan the future of their wealth and significantly reduce or even eliminate the payment of estate taxes by establishing an AB trust or revocable wills. In addition to these options, various other techniques can help individuals and married couples reduce their inheritance tax bill.
With this in mind, creating a will is important in securing your family’s future. Many jurisdictions have an exemption threshold, which means that estates below a certain value are not subject to estate taxes. If your estate falls below this threshold, your beneficiaries may not have to pay any estate taxes.
Asset transfers between spouses are often exempt from estate taxes or eligible for deductions. That may make leaving it to your spouse a good idea as it may not be subject to taxation upon your death. Just note that the obligations take effect when the surviving spouse dies.
Of course, estate tax laws can change. So, it’s crucial to stay informed about any updates or revisions. Periodically reviewing and updating your estate plan in light of them can help ensure that it remains effective and aligned with your goals.
3. Protects your beneficiaries
There was a time when only highly wealthy individuals engaged in estate planning. But the same does not happen these days; even families belonging to the middle class also plan their estate for the sole purpose of protecting the beneficiaries. After all, you don’t always need to be supper rich to care for your family and loved ones.
Even if you leave behind an old home, you must still plan what happens to it and who gets it when you are not alive. In the absence of an official document, there is always a chance for the wrong people to get a hold of your property. That “wrong person” does not have to be a squatter; it can be one of your children who cannot look after the property or an undeserving relative.
Also, when the court decides to transfer the property, it takes more time, racks up more fees, and the process often gets ugly, hurting the beneficiaries significantly. After all, courts are oblivious to your family situations.
4. Protects your children
Thinking about your death at a young age is extremely distressing, but you often must do it because you never know what happens next. As they say, always hope for the best, but never forget to prepare for the worst. Having an estate plan is your way to prepare for the worst—this way, you plan for your kids, especially if they are young and cannot support themselves.
Establishing a will ensures that your kids are well-taken care of and they don’t have to ask for financial help from others. You can plan as you want; you can name their guardians (when they lose both parents before turning 18). Without a will, the court decides who takes care of your kids, which might not align with your wishes.
Suppose you have minor children and no surviving parent or legal guardian is named in a will. In that case, the court will typically determine who assumes guardianship of your children. The court’s decision will prioritize the children’s best interests but may not align with your preferences or wishes. This can lead to family disputes or disagreements, especially regarding child support.
If there’s a surviving parent, they’ll generally assume custody of the children. However, custody issues can arise if disputes regarding their fitness or suitability exist. Again, the court will weigh in on this issue to protect the child’s welfare.
5. Avoid problems later
Stories about family members coming at each other’s throats over property issues are not unheard of. So, many people resort to estate planning to avoid the mess in their kids’ lives when they are no longer with them. In some cases, this desire to shun such a mess is triggered by witnessing the same happening to the family of a relative or a friend.
Kids might quarrel, or claims might be made by people who do not have a share in your property. One of your kids might think they deserve more but forget how much debt they have racked up. The other child might believe that since they were your favorite, they must get more wealth. Even worse is when the one child who does not fight fails to get anything due to others taking hold of everything.
Family disputes can get shambolic and may end up in court. So de-escalating these fights before they even start is one of the reasons parents can engage in estate planning. It also helps you make individual plans according to the needs of your kids and your personal inclinations. For instance, you might want to give a part of your wealth to a cause you associate yourself with. Or allocate some money for a child who is not physically fit and should not get a lump sum.
Even if estate planning is not fun, you must still do it by connecting with an estate planning attorney. Choosing someone who will care for your wealth in case you lose your ability to manage it or when you expire can help you significantly reduce family fights and avoid probate and lengthy court proceedings.