Everyone seems to know that retirement planning is important. Preparing your nest egg, saving for your children’s college funds, and many other activities seem so natural and obvious that many people do not ever stop to wonder why they are doing them at all. But estate planning is, often enough, not considered equally as important. Saving and preparing for your eventual passing, or your unexpected incapacitation, does not seem to inspire the same sort of dedication and interest as other financial priorities. Nonetheless, estate planning is a critical component of securing your financial health, and today we will help you understand why. Here are just a few reasons why estate planning is important.
Do you have a plan for your estate after you’re gone? The Templeton Group at Cornerstone Financial Management can help you strategize so that your wishes are followed while discussing options to avoid probate. Learn More
Estate Planning Is Not Just for the Uber-Wealthy
Despite the typical assumption, estate planning is not just important for those with inordinate wealth or property they need to properly distribute and account for. Estate planning is also important for anyone who wants to make sure that their possessions are properly managed after their death, and even more important for those who want to ensure that their family and loved ones are provided for and are not unnecessarily burdened with the task of managing your estate once you pass.
Estate Planning Is Not Just About Your Passing Away
While estate planning is normally thought of as planning for your eventual death, it can also help protect your interests if you are incapacitated in some way and cannot make your own decisions. Designating powers of attorney or a healthcare proxy is an important part of estate planning that can provide you the reassurance that comes from knowing someone you trust will be positioned to carry out your will if you can’t.
Estate Planning Helps Avoid Intestacy
Intestacy is a major concern for anyone without a written will, since the intestacy rules of your state govern how your estate is eventually distributed in the event of your dying without a proper will. That means that a court will decide how to distribute your estate, not you, your lawyer, or your loved ones. Proper estate planning helps to avoid this possibility.
Probate is the process by which your estate is divided in the event that you leave behind no will—or if your will ends up being contested. Additionally, some assets must go through probate before they can be distributed. Probate can be a wildly expensive and lengthy process that reduces the value of your estate and delays the time when your loved ones receive their inheritance.
A strategic estate plan can reduce the amount of assets in your estate that must go through probate. Avoiding probate can also reduce the cost and stress your loved ones may experience when distributing your estate.
Estate Planning Helps Protect Your Beneficiaries
While many people might imagine estate disputes to be the purview of the rich and famous, practically anyone today can have investments and assets they will want to leave for their loved ones in the event of their passing. The main element of proper estate planning is designating who gets what when your estate is eventually passed down. To ensure that your assets are distributed in the manner you deem desirable, a will is necessary.
Estate Planning Helps Reduce Tax Burdens
Once you have passed, your estate will be apportioned out to your beneficiaries. However, the value of your estate may also go towards paying both state and federal estate taxes or state inheritance taxes. To reduce this tax burden as much as possible, many choose to establish ABC or AB Trusts or establish revocable living trusts. In some cases, estate planning can help by eliminating your tax burden entirely, meaning your beneficiaries receive the full amount of their inheritance without having to pay tax at all.
Estate Planning Helps Protect Your Children
If you have young children and are concerned for their well-being, estate planning is a key element in protecting their best interests. By setting up a will, you can designate how your children are to be taken care of until they reach majority age, and what they are to receive as inheritance from your estate. Without a will, courts not only will distribute your estate as they see fit but will also designate how your children are to be taken care of after your passing.
Estate Planning Helps Avoid Family Drama
The opportunity for monetary gain and property acquisition, unfortunately, brings out the worst in some people. One of the critical needs that estate planning serves is to curtail these impulses by reducing the possibility of a messy, drawn out battle between opposing family members and loved ones over “who gets what” when your estate is eventually divided and distributed to your beneficiaries.
This not only helps to ensure that your estate is apportioned in the manner you decide, it also helps prevent the unnecessary mental and emotional anguish your loved ones may suffer from having to both grieve the loss of their loved one and watch as their family is torn apart in the ensuing fight over the remaining estate.
Finally, Estate Planning Gives You Reassurance
All of these benefits, ultimately, are about helping to give you reassurance from knowing that once you have passed on or can’t decide how your estate is managed anymore, your wishes will still be upheld and your loved ones will still be properly cared for because you took the time to prepare.
Get Estate Planning Help
Estate planning can be complicated and time-consuming, but it is important if you are planning on leaving your estate to your loved ones. Our estate planning advisors at The Templeton Group at Cornerstone Financial Management can assist you. Contact us today to request a consultation
This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation. Cornerstone Financial Management and LPL Financial do not provide legal advice or services.