Why Do Estate Planning?:
There are many reasons why everyone should consider estate planning. Having a good estate plan in place will make sure your assets are managed and disposed of in the manner that you prefer when you die or become incapacitated. Estate planning also helps to defer the occurrence and the burden that families suffer from with the wealth transfer tax system. It also protects any inheritances that you pass on to your heirs from any creditors to whom they owe money. You do need to have a plan in place because if you die without a will or living trust, the job of managing and disposing of your assets, even the custody of your children, passes into the hands of the courts.
You don’t need to be wealthy to have an estate plan in place. There are several questions that you could ask yourself when you are wondering if this is right for you. These include:
- Does the combined amount of assets you have and the gifts you have given exceed the allowable amount of applicable exemption?
- Does it matter who receives any of your possessions and assets after you die?
- Would you like to maximize the value of your total estate?
- Would you like to minimize the amount of taxes your heirs have to pay on any assets they receive from your estate?
- Does it matter who gets custody or guardianship of your children?
- Do you want your children to receive their inheritance after they reach a certain age?
If you answered “yes” to any of these questions, then you do need to consider estate planning.
Many people do not think of their possessions as assets. The family home is one important asset that you would like to pass on to your children. If you do not have any sizable amount of money in the bank, the taxes on this home could be as much as half the value, which means that the children will be better off selling it than keeping it, if your estate has a value of over 1.5 million dollars and this amount is due nine months after your death. With the value of houses on today’s market, it is not hard for any well-preserved home to reach this amount.
As part of an estate plan, you can have a living trust. This means that you keep possession of your assets while you are alive and you direct the disbursement of the assets at the time of your death. The main benefit is that you avoid probate. Probate refers to the court supervision of the disposal of your estate and could mean that the ones you want to get something are not even considered. In avoiding probate, you also avoid court costs and legal fees, in addition to making sure that your heirs receive their inheritance right away.
Many people avoid estate planning because they think it focuses on death and funerals. Actually it is the opposite. Estate planning focuses on life after you die. You work all your life to build up assets that you want to pass onto your children. Through an estate plan, you can designate who gets what and when. If you have life insurance, even though you have a beneficiary designated on the policy, you may want the death benefit to be divided equally among the children. Without an estate plan, this may not happen, especially if it has to go to probate. Many families have become divided after the death of a parent because of the lack of an estate plan that clearly specifies how the estate is to be divided and shared.
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