Especially if you’ve already written a will, you may be wondering whether or not to make an estate plan. Estate planning, in comparison to writing a will, is a more comprehensive way to prepare for estate transfer after your death. Beyond simply stating who you would like your assets to be passed on to, estate planning establishes how the assets will be passed on, while ensuring that your beneficiaries benefit as much as possible from your estate.
Let’s discuss the top five reasons to have an estate plan as an established adult.
Reason #1: Protect Your Beneficiaries.
One of the main reasons to create an estate plan is to protect your beneficiaries. Estate planning ensures that your instructions for the estate transfer are water-tight, with no room for interpretation or confusion. So, your named beneficiaries will receive the assets that they’re entitled to upon your death.
In other words, an estate plan gives you complete control over who gets your assets. You don’t want that power to fall out of your hands and to the court, as it could mean that your beneficiaries don’t get what they deserve.
Give Your Beneficiaries Financial Security.
Your assets will also provide financial security to your beneficiaries. Especially if you’re the breadwinner in your family, your estate plan will allow your family to maintain their current quality of life without your regular income. This can provide peace of mind in knowing that your family will be provided for in the event of your death.
Reason #2: Avoid The Probate Process.
With a complete estate plan, you can ensure that your family dodges the probate process altogether. In the estate planning process, you’ll pinpoint assets that could be subject to probate and implement solutions so that your estate can be distributed easily, with as little court intervention as possible.
Probate is a Lengthy, Time-Consuming Process.
The probate process typically lasts for months, given that ample time must be provided for creditors to make claims. This time commitment, on top of potential legal fees and the effort required to carry out the probate process, is a sizable responsibility for the family of the decedent to take on. So, sparing your loved ones from the hassle of probate is one of the biggest benefits of estate planning.
Reason #3: Avoid Family Disagreements.
Through estate planning, you can avoid quarrels between family members over who should receive your assets after your death. This type of family dispute can have damaging consequences, with the possibility of family members having to face each other in court.
With an estate plan, you can nip potential fights in the bud by selecting a personal representative to manage your estate after you die. By taking this step, you’ll have the assurance that your estate is managed according to your wishes – not according to the winner of a family feud.
Reason #4: Prepare In Case Your Health Declines.
What if your health declines in your elderly years and you become unable to get your affairs organized? By creating an estate plan, you’ll designate a power of attorney to handle your affairs in the event that you’re no longer able to. In the case of mental or physical incapacity, your designated power of attorney will step in to take care of matters in your best interest.
The Important of Your Medical Power of Attorney
Without an estate plan, the court would designate the individual who controls your medical affairs. It’s important to fully trust the individual making important medical decisions on your behalf, and estate planning can ensure that your medical power of attorney is up for the job.
Reason #5: Lower Taxes For Your Beneficiaries.
Through estate planning, you’ll work out an estate transfer method that leads to the lowest tax load for your beneficiaries. This is a thoughtful, prudent step, given that the taxes owed by beneficiaries after your death can be significant.
Oftentimes, even with minimal time spent in the estate planning process, you’ll be able to significantly lower (or even eliminate) the inheritance taxes, federal estate taxes, and state estate taxes imposed on your estate. Through estate planning, you can even save your beneficiaries from paying your final income taxes.
Estate planning is crucial to the process of getting your affairs in order for the event of your death. With a detailed estate plan, you can set your beneficiaries up to receive their rightful assets as quickly and easily as possible.