When you first hear the word “estate,” you may think of a stately mansion with sprawling grounds or maybe pricey antiques up for auction. And you may think that estate planning is solely for those with actual “estates”; however, that isn’t the case. Estate planning can benefit everyone, regardless of age, marital status, or net worth.
In fact, estate planning is an important part of your overall financial plan and wellbeing. According to a Gallup survey in 2021, less than half of US adults have an estate plan in place. It is easy to put off thinking about an estate plan because it’s not fun to think about death and it can require making some emotionally charged decisions.
What is an estate plan?
An estate plan is an important component of your holistic wealth plan. It is a collection of legal documents and strategies created to manage and safeguard your assets, both during and after your lifetime. An estate plan typically includes a will, trusts, powers of attorney, advanced healthcare directives, and other related documents.
Why is estate planning important?
By implementing an estate plan, you can ensure that your wealth is distributed according to your wishes, reduce tax liability for yourself and your beneficiaries, address issues such as guardianship or end-of-life care, and more.
Here are three reasons why you may want to consider creating an estate plan of your own:
1) Protects Your Wishes
Estate planning can be a powerful tool for protecting your wishes that goes beyond the standard who-gets-what after you die. For example, with a durable power of attorney, you can designate someone to make financial and legal decisions on your behalf if you become incapacitated. This ensures that your wishes are respected even if you are unable to communicate or make decisions for yourself.
Advanced healthcare directives, on the other hand, allow you to outline your preferences for medical care, including end-of-life care, and appoint someone to make healthcare decisions on your behalf if you are unable to do so.
Finally, guardianship provisions for children and dependents can ensure that your loved ones are cared for by someone you trust. You can also elect to name a guardian for pets.
Many people have the misperception that estate planning is only useful if you’re married or have children. The truth is these documents apply to almost every adult and if you have specific wishes you’d like carried out, it could pay to make an estate plan.
2) Saves Time and Money
One of the significant benefits of estate planning is that it can save you time and money by avoiding probate. Probate is a legal process that takes place after someone passes away. Assets are distributed among their heirs according to their will or state law. The probate process can be lengthy and expensive, often taking months or even years to resolve.
In contrast, with proper estate planning, you can aim to avoid probate altogether, thereby saving your family time and money. By creating a trust, designating beneficiaries for your accounts, and taking other estate planning measures, you can ensure that your assets are transferred smoothly to your loved ones after your death without the need for probate.
3) Eliminates Family Drama
Without clear instructions and plans in place, family members can dispute how assets are divided and distributed, which could lead to hurt feelings and long-standing grudges. However, with proper estate planning, you can avoid these disputes. By creating a will or trust, you can clearly outline your wishes for asset distribution and avoid confusion or disagreements among family members.
Additionally, by naming an executor or trustee to carry out your wishes, you can eliminate any uncertainty about who should be in charge of managing your estate. Overall, by taking the time to plan your estate properly, you can help ensure that your family is spared from any unnecessary drama during a difficult time.
Thinking About Creating an Estate Plan?
To sum up, an estate plan plays a crucial role in an effective wealth management strategy by providing protection for assets and ensuring your wishes are carried out. It can be beneficial to work with both a wealth advisor who is a CERTIFIED FINANCIAL PLANNER® professional and an attorney who specializes in estate planning while creating your plan as they can help you organize your thoughts and desires, create an effective strategy and execute the appropriate documents.
Contact a Marshall wealth advisor to get started on your estate planning journey.
