What comes to mind when you think about planning for the future?
For many of us, short to medium term plans take center stage.
We look ahead to things like climbing the career ladder, saving enough money to buy a house, getting married, and having kids. Heck, for some people, the most pressing future consideration is where they’ll go for dinner tonight!
Unfortunately, the vital matter of what happens in the event of our death tends to be relegated to the side-lines. Indeed, over 50% of Americans lack even a basic estate plan.
But why is estate planning important?
It’s a good question, and one that’s worthy of an in-depth answer. In essence, it comes down to what you stand to lose by failing to plan, and what you’ll gain by doing it. Looking for further insight into the virtues involved?
Keep reading to learn all about estate planning and why it’s so essential.
What Is Estate Planning?
In simple terms, estate planning involves writing down answers to the following kinds of questions:
What will happen to your assets when you die?
How will those assets be divided and who will get what?
What will happen to your liabilities when you die?
What are your preferences for potential medical emergencies where you’re unable to make decisions for yourself?
Who has the power of attorney in those situations?
The answers will, of course, vary by person. Everybody has unique circumstances and desires, which impacts the content and process of planning their estate.
For example, the estate plan for somebody with minimal assets, and no children is unlikely to be complex. But the opposite could be true for someone with multiple homes, numerous children from previous marriages, and significant financial wealth.
Circumstances aside, though, estate planning is about taking control of your affairs while you still can. By looking ahead, you ensure that your wishes are met and that your closest loved ones are taken care of when you die. Read more about the importance of estate planning in the next section.
Why is Estate Planning Important?
Still wondering why you should care what happens after you die? Here is a selection of primary incentives that should compel anybody to get their estate in order ASAP:
1. To Take Control of Your Wealth
You might have acquired a reasonable degree of wealth throughout your lifetime.
You might have multiple homes, stock portfolios, money in the bank, and famous art on the walls. Imagine dying suddenly one day, without a will, having made no attempts to document how your assets should be divided.
The fate of your worldly possessions would fall to the state in which you live. They’d decide how your estate would be divided. The wealth you worked so hard to generate could end up going to people and places you’d rather they didn’t.
Of course, you don’t need megabucks to benefit from estate planning in this way. It’s in the interest of anybody with assets to decide what happens to them. It’s a means of ensuring your wishes, as of now, are carried out in your absence.
2. To Ensure Your Medical Preferences Are Met
Contrary to popular opinion, estate planning isn’t just about preparing for death.
It’s also about stating your requirements and desires if you were to be incapacitated somehow. Imagine suffering a serious stroke, having a debilitating accident, or developing dementia. There’s a chance that you’d no longer be able to make decisions for yourself.
Without an estate plan, there’d be no way of knowing your medical or financial preferences. Consider giving somebody the power of attorney to act on your behalf. Telling them what you want to happen in these circumstances will ensure your needs are met.
3. To Protect Your Family
Having an estate plan makes your family’s life far easier too.
In the event of your death, the last thing they need is a long and confusing state of affairs to handle. It should be a time of mourning- not one of familial disputes and legal challenges.
Indeed, it isn’t unheard of for families to argue over large estates. Some people can feel entitled to ‘their share’ and feel hard-done-by if they don’t get it. Emotional conflict and disputes can rage over the money involved.
As we’ve noted, a well-formulated estate plan clarifies your wishes and distributes wealth accordingly. The right family-members receive the money they need to support themselves in your absence.
4. To Reduce the Tax Burden
Planning your estate helps to protect it from the IRS as well!
You can put a strategy in place to limit the amount of tax that can legally be taken from it.
Let’s face it, tax is a tricky enough pill to swallow in life. The fact that the wealth you’ve accrued can be taxed in death is even harder to think about. Without a plan, the people you care most about may only get a percentage of what’s on the table.
This is another example of the empowering nature of planning your estate. As we’ve said above, it’s about taking control and ensuring the best outcome possible if you die.
Considering working with estate planning attorneys for help making that happen.
Time to Plan Your Estate
Tens of millions of Americans don’t have an estate plan in place.
We could understand why! After all, few people revel in the thought of their death. It isn’t easy, or particularly fun, to look ahead and put a plan in place for it.
As we’ve seen, though, it’s of utmost importance to both you and your family. Without a plan, you leave your wealth in the hands of external powers. There’s no guarantee your wishes will be met.
Why is estate planning important? Hopefully, this post has provided an adequate answer to the question.
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