It may seem like an unnecessary hassle to organize finances and place assets in the hands of those you trust, but creating an estate plan will ease your mind so when the time does come to pass away, you have taken care of your loved ones.
Why should I do this now?
Similar to a prenuptial agreement, not many people are eager to think this far in advance to divide assets. However, the bottom line is that after estate planning, you are saving your family from extreme tax payments, chaos of funeral/death arrangements, and minor children placement.
Many people procrastinate estate planning because of various factors like: it’s time consuming, people are busy, people are unaware of how to create a will, or people think they have more time on their lifetime card than the can be sure of. 51% of Americans between 55 and 64 years old do not have a will. In comparison, one survey found that 32% of participants said they would prefer to get a root canal than plan a will. Why is that? Respondents would rather endure an extremely painful oral surgery than sit down and sort out assets that benefit their families.
What is Estate Planning?
Do you want the state to decide where and how your assets are distributed after you pass away? Probably not, so it’s time to sit down with a lawyer and you family, and make a will. A person’s ‘estate’ is comprised of your home, car, checking and savings accounts, life insurance, furniture, and personal possessions. Estate planning is deciding who gets what when you pass away and when they receive it.
- Instructions for how you want to be cared for if you become disabled
- Appointing a guardian and inheritance manager for minor children
- Providing financially for family members and loved ones
- Provide for the business transfer at retirement, disability, or death
- Minimizing taxes and court time/costs
- Allowing you to update and change things to your will as finances and families change
Will vs. Living Trust
Which is more beneficial- a will or a living trust? Typically, people prefer a living trust due to the avoidance of a probate, or evidence of a will to the court, at death. If you create a will, you could be subjected to expensive legal fees, executor fees, and court costs. Additionally, it can take up to two years for your assets to be distributed to your designated loved ones. Any assets in your will must go through the probate process before they are granted to your heirs and are often made public knowledge. It’s understandable that most people prefer a living trust, due to the extra time, effort, costs, and public knowledge that a traditional will requires.
A living trust is highly recommended due to …
- The avoidance of the probate process
- Prevents the court from taking control of assets if you become incapacitated
- Organizing all your assets into one plan
- Provides privacy – not available to the public
- Able to be changed at any time
With the privacy, flexibility, and organization of a living trust – it’s obvious why most people choose this route.
Another aspect to consider is a life settlement – some people choose to sell their life insurance plan in order to receive a sum of cash that is greater than the policy’s cash value but less than the net death benefit. Basically, whoever you sell your life insurance plan to must agree to pay more money to support the cost of the policy you purchased, but will receive the death benefit when you pass away. Typically, the two choices of a life settlement are to sell your policy for cash or to allow it to fade with you after you die. This is an important aspect of estate planning because you can organize your assets prior to passing which can relieve stress before the time comes.
Estate Planning yourself or with a Lawyer?
One of the main reasons so many people have prolonged the estate planning experience is due to the time, effort and knowledge it requires. The complexity of estate planning leads most people to work with a lawyer to ensure a proper and tax-saving future.
Skilled estate planning lawyers can add value and expertise when assisting a client in creating a will by…
- Conducting a thorough analysis of your assets
- Crafting legal documents that express your wishes if you become incapacitated
- Protecting your assets from a nursing home – if you choose to live here at an elderly age
- Appointing a guardian for your minor children
- Assisting in appointing trustees who will manage your account after death
- Avoiding the probate process and expenses
- Ensuring your legal documents are done properly which will prevent legal potential challenges
The importance of estate planning comes down to planning what to do with your legacy when you are gone and who you will trust your assets with. The option of allowing the court or state to dictate who your children are left with when you die, or how you are medically handled if you become incapacitated can be overwhelming. The good news is that all those worries can be calmed after an estate plan is created. You can rest easy knowing that the ones you love are taken care of after you pass.
About the Author
Alexa Martin is a freelance writer who has worked with multiple law firms to educate readers on a myriad of topics. As a recent communication studies graduate from Loyola Marymount University, she is now a search specialist who researches and writes about controversial and trending topics.