According to a survey done by the AARP, about 6 in 10 Americans haven’t prepared a will or set up an estate plan.
If you fall in that percentage of people who haven’t made any preparations, you may be wondering what the big deal is. Why is estate planning important, anyway?
Well, there are several benefits that come from making preparations for when you pass. We’ll break a few of them down for you.
1. You Can Choose Who Gets Your Assets After You Pass
One of the benefits of estate planning is that you can decide who gets to inherit all of your assets once you’ve passed on. You don’t have to be wealthy to start estate planning, but in fact, as long as you have belongings, you can set one up.
Whether it’s the family home, a vacation home, stocks, or any kind of material belongings, you can delegate who will receive all of these once you’ve passed on.
If you don’t have an estate plan, then the court will decide who gets what. While this might sound easier for you, it won’t be easier for the family you’ve left behind. Many families will be in court for years arguing over who gets what; however, you can make this easier by deciding who gets what now.
You can learn more about this issue from this post.
2. Protect Your Children
If you have younger children under your care, you should really think about setting up an estate plan. Even if you aren’t sick or older, something could happen that could take you away from your children forever.
What will happen to them if that happens? Who will take care of them?
If you don’t have an estate plan, you can designate a guardian who will be in charge of taking care of them when you’re gone. If you don’t have a guardian designated, the court could end up putting your children in Child Protective Services, where they could end up in foster care.
To avoid that, you can set up an estate plan.
3. Prepare Your Future Generations
Setting up an estate plan can also help the future generations of your family by already designating how the wealth and property should be distributed. Some people also want to ensure that certain heirlooms are kept in the family, and an estate plan can help you do that.
While you’re planning on how to use your wealth or materials to help the generations that come after you, you can choose whether or not to include your family in the planning process. If you involve them now, they will have a clearer idea of what your vision is and be more likely to carry it out once you pass.
4. Avoid Family Feuds
If you have an estate plan in place, then your attorney will be in charge of designating the inheritance to the beneficiaries you selected.
If you don’t have an estate plan though, the court will try to designate who gets what, which can lead to family feedings. While some family members may be upset that you didn’t include them in your estate plan, legally there isn’t anything they can do.
With no estate plan, your family could be in court proceedings and arguments for years after your death.
5. Override Your Default Will
Even if you don’t have a will or an estate plan set up, the state does for you. The state sets up a default will for everyone, which means that there will be no customization of how your wealth gets distributed unless you say otherwise.
Most people don’t want that, so this is another reason that it’s important to come up with your own. When you make your own estate plan, it overrides the default one, which means that this is now the legal one.
Before you do this, you should make sure that you also hire an estate plan lawyer to make sure all of the legalities are ironed out.
6. Plan for Philanthropy
Whether or not you have heirs to your wealth, estate planning can really help you plan out your charitable donations.
If you don’t have any heirs, you can designate how much money you’d like to donate and to which organizations. This can be a great way to have your honor and memory passed down for generations to come. You could also create a foundation in your family’s name.
For those who do have family that they want to leave money to, figuring out how much to leave them can give you a good idea of what will be leftover. Once you know that, you can also include the donations with anything leftover you might have.
7. Reduce Taxes
Every tax that you pay is less money that you’ll be able to leave for your family, so you should try and minimize your taxes in any way possible.
Creating an estate plan can actually leave more money in your pocket. When you have an estate plan, you’ll receive all kinds of tax reductions and possibly even get rid of the estate tax. However, this is depending on how much the net value of your estate is once you pass.
Learn More About “Why is Estate Planning Important?”
Hopefully, this helps to answer the question of “Why is estate planning important?”
Figuring out how to manage your money and dealing with the emotional process can all feel overwhelming, but it doesn’t have to be.
We offer many articles to help you through the process. If you enjoyed this article, make sure that you explore our website to find more just like this one!
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