5 Ways Estate Planning Protects Your Family
The term “estate” may be typically associated with mansions, fine jewelry, massive stock portfolios, and other expensive possessions, but real estate planning isn't exclusive to the rich and famous. Regardless of your financial status, age, or family dynamics, establishing an estate plan is critical in ensuring your loved ones will be provided for when you're gone.
While estate planning may mean you're preparing for an end-of-life decision, it can protect you and your assets after you die. Even if you don't have valuable art, expensive yachts and sports cars, a large IRA, or an expensive home to pass on, settling your finances after your demise could have a lengthy and costly impact on your family if you don't have a plan in place.
If you're not convinced that estate planning is necessary, here are five ways it can protect your loved ones and help avoid possible serious repercussions for your heirs:
1. By allowing your family quick access to your assetsWithout an estate plan, it can take three to nine months for your family to access your assets after you die. Whereas, having a will in place will make sure your family will receive funds quickly to cover immediate expenses such as hospital bills, funeral costs, and other routine expenditures.
Allowing your estate to go through probate means letting your loved ones wait for several months before getting anything. Imagine how stressful that situation can be, especially when they're left to deal with debts and expenses that need to be settled urgently.
You can prevent such a disaster by planning your estate properly. You can get in touch with inheritance lawyers to guide you through the process. You can learn about estate planning services on sites like newviewep.com. Appropriate estate planning allows faster property distribution to your heirs. Your loved ones can avoid inconvenient delays and alleviate financial stress while dealing with grief.
2. By sparing your loved ones from difficult decisionsEstate planning isn't just about distributing your assets and wealth. It also involves critical elements concerning end-of-life care associated with medical decisions when you're unable to decide for yourself. This can include the use of CPR and life support, organ donation, and also disposal arrangements.
Having an estate plan in place will spare your family from making difficult decisions that can only aggravate their pain. You can help ease this unnecessary burden by planning in advance and leaving a will that states your wishes. Only you can make decisions for yourself, so your family knows they’re acting in your best interests.
3. By reducing transfer taxesTransferring assets to heirs with the goal of minimizing their tax burden is critical to estate planning. Suppose you or your family has amassed significant wealth and wish to declare your family members or loved ones as heirs upon your death. In that case, the estate planning process can assist you in developing a strategy to do so in the most tax-efficient manner possible.
When moving funds, there are three types of taxes: generation-skipping transfer tax, gift tax, and estate tax. Because the Internal Revenue Service (IRS) limits how much money you can distribute and to whom you can allocate it without being taxed, a good estate strategy allows transfer of wealth that seeks to minimize the taxes you or your estate owes from the government.
4. By protecting your young childrenDying young can happen to anyone, though it's a concept you'll most likely dread planning for. Imagine what would happen to your young children if you and your spouse or partner died from an accident? You wouldn't want them to end up with nothing or having difficulties accessing what's rightfully theirs.
Estate planning allows you to have complete control over the situation even after passing away. That way, you don't have to enable the courts to decide on your children's lives. You can authorize a guardian, specify your financial wishes for your children, and leave instructions through estate planning.
5. By preserving family wealthThroughout your life, your investments and assets may encounter threats and troubles in various ways. As people become wealthier, they're more vulnerable to class action suits that attempt to take advantage of their hard-earned fortune. Estate planning protects your accumulated wealth by removing your name from assets and transferring them to legally recognized vehicles such as limited liability entities or trusts.
The most important aspect of estate planning is naming heirs for your wealth, whether it’s a stock portfolio or a vacation home abroad. Without an estate plan, you're giving the courts the right to decide who receives your assets, a lengthy process that may take years, incur fees, and become complicated.
This can happen when a court has no way of knowing how you want your estate managed. Even if there's a surviving spouse, it's not automatically guaranteed that the courts will give it to them, particularly when there are intervening factors.
The bottom lineEstate planning can be a tricky and emotional process. However, going through one is critical if you want to ensure your family will be protected no matter what happens. If you don't have the slightest idea how to get started, seeking advice from an estate planning attorney or a wealth advisor is the best way to go about it.
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