Human life is unpredictable; that is a reality. Incidents, accidents, mishaps, or misfortunes can occur at any time. Ironically, death stands as the most anticipated yet unpredictable thing in human life. Most people remain stressed over the management of their hard-earned assets after they pass away. Issues involving the inheritance of belongings act as a deterrent in enjoying your old age.
Although estate plans are an effective way to solve this issue, some people remain wary of an estate plan. “Do I need an estate plan?”. “Will it be beneficial?”. “My friend does not have one, why should I?.” These recurring thoughts may cause stress and anxiety. Here, we consider five major benefits of an estate plan to hopefully answer the question do I need an estate plan.
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Reason #1. The plan takes care of you!
Yes! Most people mistakenly believe that an estate plan is only efficient in case of demise. However, such plans also have a provision regarding sudden and unpredicted mishaps. Furthermore, you decide who will take care of decisions regarding your belongings if you become incapacitated to do so. Similarly, you may be unreachable while traveling or vacationing. The estate plan also determines who to contact for urgent decisions in these cases. Also, your assets do not pass on to your heirs during your lifetime. Instead, the estate plan nominates a reputable and skillful organization or trust to manage your assets.
Additionally, the estate plan also addresses decisions regarding power of attorney in case of mental incapacitation. All these aspects ensure your safety and the protection of your assets during your lifetime. Some people also prefer to mention issues like healthcare proxy services, estate management agents, and people who have legal control over financial matters in the estate plan. Such decisions make your estate plan a supportive companion in your old age.
Reason #2. Determining your last wishes
An estate plan is incomplete without a formal will. This document formally names a person who will become responsible for your estate in case of your demise. This personal representative or formal executor serves to distribute your property and assets based on your personal directions. Another benefit of the estate plan is the ability to nominate guardians in case of minor children. These trusted guardians oversee the property until children reach adulthood.
Furthermore, if no such person is available, the estate plan nominates a revocable trust or personal property memorandum to manage assets. Similarly, estate plans help to avoid the overlook of assets that are not inherited directly. For example, heirs cannot inherit assets like retirement accounts and life insurance in most cases. Your estate plan coordinates the disposal of such assets.
Reason #3. Minimize Taxation Issues and Maximizing Transfers
The Tax Cuts and Jobs Act of 2017 removed certain limits placed on inheritance and expanded others. Your estate plan ensures that you take the maximum benefit of these increases. However, maximizing transfers without skillful management may lead to excessive taxation. In such cases, your estate plan can mediate the transfer process to minimize the taxes paid. The plan also guides you on legal methods to avoid triggering the imposition of transfer taxes. Other benefits of the new law that estate plans incorporate include high exemption levels until 2026 and sharing of exemptions between spouses. Estate plans also employ annual legal exemptions to complete the transfers required without tax payments slowly. For example, annual tax-free gifts have increased in 2019 to $15,000. Married couples can give tax-free gifts of up to $30,000. If you indicate that you wish to transfer certain property to your spouse, the estate plan can use these annual limits to complete the transfers slowly. Such methods result in zero taxes paid on transfers.
Reason #4. Estate plans are the right hand of philanthropists.
If you wish to serve humanity even after you pass away, setting up an estate plan is the first step. Estate plans can help in all sorts of philanthropist goals: personal fulfillment, tax-planning, generational connection, and legacy. The planning process involves the selection of a charitable course that your assets will serve to fulfill. You may select the option of making a tax-free gift for such causes. In this case, your estate plan will determine the best way to make the intended gift. Similarly, the estate plan manages donations from your assets at regular intervals after your demise. All these facilities make your estate plan the best option for philanthropist goals.
Reason #5. Protecting Wealth and Preparing Its Transfer
Your wealth is the result of your hard work spanning several years. For obvious reasons, you wish to protect it after your demise. One key benefit of an estate plan is the protection it offers to your hard-earned wealth. The estate plan’s preparation reduces the chances of your adult beneficiaries making poor decisions after your demise. Also, it solves the issue of divorce-related transfers and problems with creditors.
Additionally, your beneficiaries receive their share of your assets without the influence of outsiders. Furthermore, any disputes that may arise if an estate plan is not set up can incur high legal costs. On the other hand, an estate plan prevents the possibility of such disputes. Estate plans also incorporate asset protection planning measures. These measures protect your assets from the negative effects of poor decisions after your demise. Finally, estate planning avoids the risk of probate court. The will secured within the estate plan is already verified. Thus, your family and beneficiaries receive their shares in the shortest period after your demise.
Your old is a golden period of your life. After years of hard work and dedication, you are free to enjoy the last half of your existence. An estate plan ensures that you can be stress-free related to your assets and property. Draw up an estate plan today, and enjoy the rest of your days vacationing, traveling, and relaxing. Hopefully, this post answered your question of “do I need an estate plan?”
Our community is offering free estate planning basics workshops. You can use our find a workshop tool to find one in your area. At the event, a qualified estate planning attorney will answer all of your questions at no cost.