Why estate planning is important

Most people would be surprised to learn that they own an estate! When people hear the word “estate”, they picture massive, luxurious properties. However, that’s not what an estate is. An estate is everything that you own: your house, car, savings account, insurance, furniture, and anything of value. Size doesn’t matter when determining whether you have an estate or not, but it is important to know how to manage it.

What is estate planning

In the case of your death, your entire family would be thrown into a state of disarray. Estate planning encompasses a variety of legal elements regarding “when” and not “if”. It’s important to have a solid and firm legal plan to pass on your values and distribute your wealth, and to ensure your wishes are carried out, you need to provide instructions stating who will receive something of yours, what you want them to receive, and when they are to receive it. You will, of course, want this to happen with the least expenses in taxes, legal fees, and court costs. However, good estate planning is a lot more than just redistributing your values. It is also important to:

Include instructions on you care if you become disabled before your death.
Name a guardian and an inheritance manager for your children.
Provide a smooth transfer of your business.
Provide for children with special needs without disrupting programs they’re part of.
Minimize tax, court costs, and legal fees.
Constantly update your estate plan through all stages of life.

Creating a will or living trust

The first step to a successful estate plan is making a will. A will provides clear cut instructions, but it does not avoid probate. All assets that bear your name have to go through a state probate system before it can be distributed to your heirs. Probates vary from state to state and can take anywhere from half a year to two years or more. This a lengthy process that will have legal fees, executor fees, and court costs. Not everything will go through a probate— Jointly-owned property and assets that let you name a beneficiary (for example, life insurance, IRAs, 401(k)s, annuities, etc.) are not controlled by your will and usually will transfer to the new owner or beneficiary without probate. If you name a minor as a beneficiary, the court will probably insist on a guardian until the child legally becomes an adult.

For these reasons, a lot of people prefer a revocable living trust. It can avoid probate at death, prevent court control in case of incapacity, bring all your assets together into one plan, provide maximum privacy, and be changed at any time. A trust can outlive you; your selected trustee can manage all the assets associated with the trust. These assets can continue to support family and loved ones, while protecting the assets from irresponsible spending, spouses, or creditors. It is more expensive to create a trust initially, but given the longevity of one, it’s a great investment for estate planning.

Simplifying things for loved ones

Family members would be left in disarray and burdened with finding all your financial records, titles, and insurance policies. Wouldn’t it be swell if everything was clearly laid out in firm instructions to execute your every wish? Of course it would be, and that’s exactly what a good estate plan is. You will require a good team to guide you through the process and help you understand all the legal fees. It’s important to start early and make sure that you have one now. If you think that you can’t afford a complex plan, then just start with what you can afford. This might mean a will, term life insurance, or powers of attorneys. Don’t try to do this to save money; there is too much at stake and even the smallest errors can have a big impact. Most people expect the transition to go very smoothly, but if you mess up in the slightest phrasing of a wish, then this can have a butterfly effect on the rest of the transition and burden your heirs.

The most important thing is to start now. Nobody wants to live through this scenario, but it’s also inevitable. If circumstances change, you can always change your plan later. This is exactly the secret to strong estate planning— you want to be as up to date with common events. Marriages fail, families change, and relationships are made; life is dynamic and your estate is, too. There’s no need to hold this off until it’s too late; knowing that everything is taken care of is relieving. At Plan Kids Future we have recommended attorneys who can guide you through the process of leaving a strong legacy for your family and loved ones. We personally make it our duty to make sure that you’re saving money, securing your legacy, and not making mistakes in the process.