After spending your lifetime building up your wealth, you need to have a plan on what happens to it when you are incapacitated or pass away. Estate planning is often thought to be only for “rich” people, but this couldn’t be further from the truth. No matter your age or wealth status, you should have an estate plan in place and understand the importance of estate planning.
If You Have Young Children, An Estate Plan Protects Them
No one wants to think about passing away while your children are young and leaving them without a parent. However, accidents and the unthinkable can happen. By having a will as a piece of your estate plan, you can ensure that there is a plan in place for who will take care of your children moving forward. You are also able to deliberately decide how your assets will be divided to help financially take care of your children after you have passed away.
Saving Money On Taxes
The federal estate tax exemption of $12.92 million per person dictates only people with an asset portfolio valued higher than that will need to pay taxes. While federal estate taxes can significantly impact wealthy people, state level estate taxes can impact anyone. Estate taxes need to be paid out by the deceased person's estate, but there are also inheritance taxes that need to be paid out by the beneficiaries. These taxes can be a heavy burden on your heirs during an already emotional time in their lives.
As a part of your estate planning, you can place your property and money into trusts, create irrevocable gifts, and create joint accounts to remove your assets from being a part of your estate and mitigate any estate or inheritance taxes.
Appointing A Power Of Attorney
Often when you think of a power of attorney, you think of appointing someone to make medical decisions on your behalf if you become incapacitated. However, another option for power of attorney is to have someone make medical decisions on your behalf if you are unable to.
Saving Money On Court Fees
If you do not have a trust in place or plan for beneficiaries prior to passing away, your physical assets will end up going into probate court for your family to try to assume ownership. After going through probate, your loved ones will be left to have to pay for the court fees that can get costly quickly. Also leaving your assets to be divided by the court could go against your wishes regarding who you wanted your beneficiaries to be. By having a will, you can prevent having your loved ones experience probate court and ensure your wishes are followed through on.
Careful planning of your estate should involve the guidance of professional legal counsel. Our team at Strategic Financial Group can help quarterback this process for you by leveraging our outside legal partnerships. Schedule a consultation with us today to get started.
Sources:
https://www.nationwide.com/lc/resources/investing-and-retirement/articles/what-is-estate-planning
https://www.businessinsider.com/personal-finance/why-is-estate-planning-important