According to a study conducted in 2017, over half of all adults in the United States do not have a will or estate plans. Experts suspect that most Americans have not made end-of-life plans because they would rather not think about the prospect of death.
Making such plans can be depressing, but it shouldn’t be about you. It is for the sake of your loved ones – your family. The crucial aspect is safeguarding the future of your family by protecting and handing down your assets.
Inevitably when the time comes, you want to make sure that all your hard work and rewards go to benefiting the right people. This is why writing a will and estate planning are important.
In this article, we look at the details of wills and estate plans. We dig deeper to understand the importance of preparing these documents.
What Is an Estate Plan?
A will is a document stating the final wishes of the deceased. It describes how your possessions will be distributed among your loved ones when you die.
Wills and estate plans go hand in hand. An estate plan is a more comprehensive document describing the management and maintenance of the property after the owner is incapacitated or dead. An estate plan is fundamentally built upon the will.
An estate plan should serve the following purposes:
- Ensure beneficiaries receive what you intended them to receive.
- Distribution of property is done efficiently.
- Protect beneficiaries, especially children.
- Preserve your rights and interests should you become incapacitated.
- Provide settlements to avoid hefty taxes, claims, and fees.
- Pave the way for smooth resolution should there arise a conflict between parties of interest.
In short, an estate plan addresses all the concerns of transferring ownership of assets by detailing the procedures and any related issues.
Wills and estate plans are often wrongly assumed to be the same thing. Although they are quite similar, an estate plan is more detailed and thorough. It expounds on the will.
Wills and Estate Plans Are for Everyone
You may not appreciate it, but even you have an estate. It doesn’t have to be extravagant or conspicuous like acres of real estate or a fleet of sports cars. Your home, investments, personal possessions, savings account, car, and life insurance are all part of your estate.
Most people assume that estate planning and writing wills are for the rich and the old. The truth is, you don’t have to be wealthy or in your golden years to start making plans for your possible absence.
Although old age seems like the inevitable way to go, modern life presents many life-threatening risks. Diseases and accidents happen all the time; you could end up disabled either mentally or physically. A will and an estate plan could speak for you in such a situation.
Even small estates are worth preserving. If anything, estate planning is more meaningful to families with modest assets because they can’t afford to lose a lot.
Why Prepare a Will and Estate Planning Documents?
Planning how your assets will be managed after you’re gone is a big decision. It is an important life planning process. To encourage commitment, here are the top five benefits of estate planning and will writing.
Appoint Your Heirs and Restrict Access to the Inheritance
The most important thing is to decide who gets what in an inheritance. Being the owner of the assets and knowing the potential heirs puts you in the best position to make this decision. You will be able to distribute your wealth the best way you see fit.
You can restrict or control the use of inherited assets. For instance, you can have some heirs meet particular demands before they can own the assets.
Most people restrict the use of certain assets inherited by their children until they come of age.
Some even insist on accomplishing certain tasks like a college education or a job. In a way, still guiding the child’s lives using incentives. This also ensures that the property is not misused.
Appointing your own heirs and property managers also avoid feuds among family members fighting over your assets. We have all heard of family lawsuits persisting for years over inheritance, with some resulting in violence or worse.
Protect Your Children
Planning gives you a chance to safeguard the future of your children. You can leave them under the appointed care of trusted individuals. You could even allocate and control funds towards their uprising.
Without a will, the state decides how your children will be raised. The court may assign them a guardian from the extended family. When that’s not possible, sometimes the only option is to put them in a foster home.
A will and estate plan also ensure that your assets remain in the family. If your widowed spouse decides to remarry, the inheritance continues to benefit your children and your preferred beneficiaries.
Avoid Overpaying Taxes
Federal and state tax laws have steep tax obligations on an inherited estate valued above the exemption amount. These taxes can significantly reduce the value of the estate and are a compliance burden to the heirs.
Careful and timely estate planning lets you find ways to transfer property ownership while incurring minimal taxation. Experienced estate planning attorneys can find several ways to reduce or eliminate taxation altogether.
With your consent, assets can be transferred through trusts and other legal means that attract low fees and taxes.
Protect Assets from Creditors
Estate planning means you take care of all liabilities attached to your assets. It may involve clearing up debts, insurance, and leases. This avoids the emergence of clams from creditors and possible lawsuits in the future.
Estate planning may also protect the new owners from other unforeseen liabilities.
Guaranteed Care Should You Become Incapacitated
If you are incapacitated, you will need looking after, and someone to make decisions for you. Someone will have to fund the healthcare expenses and make medical decision on your behalf. Using a will, you can pre-determine all these details, including which asset can be used for your upkeep.
Your State Has a Plan for Your Assets If You Don’t Have One
If you are incapacitated and are no longer capable of self-care or conducting business, the court can introduce conservatorship or guardianship. In this case, a court appointee signs off on any assets used for your care.
In the case of death, the state takes over control of your assets. According to your state’s probate laws, the court distributes the wealth among your family and other legitimate parties.
Having the court handle your assets is a lengthy and sometimes expensive process. Besides, would you really rather have the court do it or yourself?
1. How to Plan Your Estate
Creating an estate plan is a simple process. It is only a matter of inventory management, documentation, and a bit of paperwork. With the assistance of an attorney and estate planning software like BeyondCounsel.io, it should be a quick process.
Here is a short series of steps to follow while creating an estate plan.
2. Create an Inventory and Plan
The first step is to make an inventory of all your assets. List all their details, including tied liabilities. From there, create a contingency plan of what should happen in the event of your death or disability. This should include how to source income and manage businesses and assets.
3. Protect Your Assets
Crucially, you need to protect your assets. Employ efficient ownership transfer schemes that protect the beneficiaries. Trusts are a great way to protect property. Some people also use permanent life insurance to secure their assets.
4. Provide for Your Dependents
The primary goal of this whole process is to ensure your dependents are taken care of. Your plan should include a clear provision for your spouse, children, and other close dependents.
Define the allocation of assets. Describe the children’s up raising plan and their future stakes.
5. Declare Your Wishes
The next thing you need to do is to document your wishes. This is where you declare how your assets should be divided among the beneficiaries. You may also want to make clear your personal goals should your decisions be challenged.
This document should reflect your end-of-life wishes, which may include the responsibilities and expected conduct of the beneficiaries. The document also states the powers of attorney. It should be legally documented to ensure that every declaration is followed.
6. Appoint Fiduciaries
To ensure the execution of your estate plan, you need to appoint a fiduciary. A fiduciary is a trustee whose task is to oversee the success of your plan. It could be a family member, a business partner, or a hired professional like a banker or attorney. In large estates, it can be more than one person.
Be sure that your fiduciaries agree to the role before legally declaring them trustees. They should have access to the original estate plan documents and be aware of the details in them.
If you want your loved ones and assets protected when you can no longer do it – and you definitely do, you need a will and estate planning. Without these documents, your assets may end up in the hands of the state, and your dependents may never get what’s rightfully theirs.
Ensure that your loved ones are comfortable and secure with whatever you leave behind for them. Don’t let others preside over a lifetime of your hard-earned rewards.
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