Approximately 60 percent of Americans have no estate plan or will. While most know this is something they should do, they don’t take the time to create it.
If you happen to pass away before creating these important documents, it could leave your family having to go through a lengthy probate process. Also, you wind up having no say in how your assets are distributed.
If you need a few more compelling reasons to create these important end of life documents, get to know some of the biggest benefits of estate planning here.
What is an Estate Plan?
Before diving into the specific benefits offered by an estate plan, it’s a good idea to make sure you know what this is. There is some confusion about it among some people.
Some believe that only the very rich or wealthy need an estate plan. This isn’t the case. Believe it or not, everyone has an estate.
Your estate is made up of everything you own, your home, car, checking and savings account, furniture, life insurance, real estate, and more. Regardless of how much or how little you own, you have an estate.
An estate plan is made up of various documents include a will, trusts, and more. When an estate plan is created, it outlines your wishes after you pass away.
Some of the specific benefits of an estate plan are found here.
1. Make Sure You Provide for Your Family
If you don’t have an estate plan currently, your family is going to receive less, and it’s going to take them much longer to receive it. As a result, your loved ones may be in a state of limbo and without the funds needed to pay bills and other living expenses after you pass away.
It isn’t uncommon for families who have experienced an unexpected death to almost fall apart because of the financial strain in the weeks, months, and even years to come. By investing in estate planning now, you can feel confident your family is going to be provided for and not left to potentially face financial ruin once you have passed.
2. Reduce Your Estate Taxes
With a smart estate plan, you can reduce or even eliminate your estate taxes by giving your assets through an irrevocable trust. This eventually transfers to your beneficiaries or even a charity of your choice. However, to receive these tax benefits, you have to use an irrevocable trust.
With a simple revocable trust, you can ensure your estate avoids probate. However, the Internal Revenue Services takes the position that you still own the assets put into the trust. Also, you can revoke the revocable trust and take possession of these assets back at any time.
This isn’t the case with an irrevocable trust. When you put your assets in this type of trust, it’s a permanent, non-reversible decision. In this case, you relinquish ownership of the assets.
Someone else (besides you) has to act as the trustee. If you can’t control the assets, you don’t own them when you die. As a result, they aren’t contributing to your taxable estate.
3. Make Your Wishes Known
Good estate planning reduces the strain put on your family. If you have an estate plan in place, your family members are going to know your wishes and intentions. This alleviates the need for them to make difficult decisions during this already challenging time.
By outlining your wishes in an estate plan or will, you can also keep your family members from fighting over assets when you are no longer there to serve as referee. With an estate plan, created now, you can avoid issues such as heartache, anger, and confusion after you pass.
Keep in mind, you don’t have to hire an attorney for the creation of this estate plan. You can use estate planning software to create the plan you want and need with ease.
4. Keep Your Children Out of Child Protective Services
While this isn’t a pleasant thought, you need to think about your children. What may happen if you or your spouse were victims of an accident and never returned home? Take some time to think about this.
Who is going to pick them up from daycare or school? Where are they going to sleep at night? Who is going to take care of them going forward?
If you don’t have any estate plan in place, you may not like the answers to these questions. There’s no reason to let your children wind up in Child Protective Services while the courts are figuring out who will be their guardian.
There’s no reason to leave this decision up to the courts at all. Creating an estate plan will eliminate this from happening.
5. It Helps You Create a Legacy
You can use various trusts for creating an ongoing legacy for your family’s future generations. Some states allow a trust to continue for many decades, and in some cases into perpetuity. This means you may establish dynasty trusts for your current and your future family members.
It’s also possible to create a legacy in your community by setting up a charitable trust, or even a private foundation that’s going to offer a self-perpetuating endowment for many years down the road.
6. Minimize Expenses
If you pass away with no estate plan in place, or without a living trust, the courts are going to have to handle everything. This includes the dissolution of a business (if you owned one), the guardianship of your children, and the distribution of your property.
This is called probate, and it’s extremely expensive. In some cases, it can cost $10,000 or more. This is money your family and your children could use for their living expenses and other bills. Instead, it’s going straight to your attorney’s pockets.
7. Protect Your Assets
If you have accumulated even a minimal amount of wealth, the fear of losing it due to a lawsuit can be a huge concern. Some professionals are more susceptible to lawsuits than others, and accidents happen all the time.
There are some advanced trusts, such as the SLAT (spousal lifetime access trust) that can help reduce estate taxes, while providing the added bonus of protecting the assets owned by the trust against lawsuits if a divorce occurs. Keep in mind, this trust, too, must be irrevocable.
Other options include specific offshore trusts, and domestic asset protection is designed to help keep assets away from ex-spouses and creditors. You can also give assets through a family limited liability company. Working with an estate planning professional can help you determine what options are best for your situation.
8. Make Your Retirement Easier
Many people are surprised to hear that estate planning may help you while you are still alive, not just your family after you pass away. In particular, healthcare is an area where estate planning can be extremely beneficial.
It can help ensure you are eligible for various government benefits, such as Medicare, which can help reduce your healthcare costs. This means you can leave more money to your loved ones.
9. Ensure Your Business Continues to Run Smoothly
If you own a small business, you need to have an estate plan. It is one of the most important things you can do. If you don’t have an estate plan, your business may fall apart quickly, which could cause a financial hardship for your family.
By planning ahead, you can ensure a smooth transition to someone else and make sure the business continues operating properly. Don’t cause a disservice for your family by leaving these ends untied.
10. Plan for Incapacity
Creating an estate plan isn’t all about death. It’s common for people to fall incapacitated due to a sudden medical episode or accident. This could be a stroke, car accident, or anything else. If this happens, it leaves the person unable to manage their financial affairs.
If this happens to you, who is going to be left to pay your bills or manage your healthcare needs. With a power of attorney in place for both healthcare and financial decisions, you can help to save your family money and time. It can also ensure everything is handled based on your wishes.
Benefits of Estate Planning: Now You Know
As you can see, there are many benefits of estate planning. If you don’t have an estate plan, yet, now is the time to have one created.
If you need help with your estate plan, then be sure to reach out to the pros. They can help ensure you get your estate plan in order in case the unexpected occurs.