Why Is Estate Planning Important?
Estate planning is important because having one in place acts as protection for your beneficiaries. These beneficiaries might be minors, or adults (grown children or chosen friends or extended family members).
A nation-wide law is in place to appoint a guardian for minor children who are left in need due to the death of their parent or guardian. This appointed conservator will oversee all the finances of the minor until they reach adulthood.
By taking the time to set up an estate plan, you appoint the guardian of your choosing. In so doing, their family avoids potentially expensive legal issues and emotional drama in the process.
If the beneficiary will be an adult at the time of their inheritance, a will can be set up with certain stipulations. For example, if your adult child isn't the best at managing money, you can create an estate plan that grants an inheritance in either small payments or a sum that isn't accessible until they've reached a certain age.
As a Letter of Intent
An estate plan can act as a basic letter of intent, which is a document left to your beneficiaries to define what they want done with their assets. This plan might include their wishes for their own funeral or other special requests they want carried out after death.
Having this in place can help surviving family members as they decide what to do with property after you have passed on. This will help prevent discord among family while offering an idea of your wishes after death.
You can leave details on how you want children to be raised in their absence or how a beloved pet should be cared for. Though there's no legality involved in enforcing some of these wishes, it will be helpful to the family left behind.
To Assign a Healthcare Power of Attorney
An estate plan can also determine a healthcare power of attorney. This means you can help designate a trusted family member or friend to make final decisions regarding your health should become unable to do so.
To Reduce Estate Taxes
A lot of money can be lost to federal and state taxes if a good estate plan hasn't been established. An estate plan can be put into place making many estate taxes avoidable.
Some of these solutions include Trusts, revocable and irrevocable. Married couples and individuals have options to reduce their inheritance tax bills and estate-related taxes.
Keep your Assets Protected from Creditors
Your estate plan can act as an asset protection plan. This is very important in protecting you and your beneficiaries from a potential lawsuit in the future.
Without an estate plan, your assets and property become vulnerable to creditors. Some creditors might seek to seize properties to pay off a debt. If a property is left to beneficiaries, those beneficiaries could end up losing it to creditors if an estate plan isn't set up as a protection.
To Help Your Clients Avoid a Financial Fiasco
With no plan in place, your family might fight over property and belongings after your passing. Expenses surrounding the maintenance of your assets can cause problems, or a business associate or friend might feel slighted.
In an estate plan, you can work to write up clear intentions. You can decide what will go to who, who will manage what, and what kind of donations they'll make, if any, to charitable foundations. Doing so will save your loved ones from the often costly process of probate court proceedings to have their estate divvied up.
If your estate includes many assets worth a lot of money, you might have want to provide for a charity after you pass. You can choose to either leave a certain percentage of their estate to a charity of their choice or set up an ongoing payment where donations will be sent for years to come.