Tuesday 11 August 2020

4 Reasons Estate Planning Is So Important

Before beginning to discuss the reasons for something’s importance, it’s essential to understand what that thing actually is. What is estate planning? In brief, it is the practice of determining what will happen with your wealth after you pass away.

For some time, estate planning was thought of as the domain of the rich. Today, that’s not the case at all. Do you have life insurance? You’ve already started estate planning.

4 Reasons Estate Planning Is So Important

Why should you make a plan for your estate? Let’s dive in:

It Protects Your Loved Ones

Though it may be unthinkable, should you pass away unexpectedly, the people who rely on you may find themselves without the means to continue their lifestyle without you?

You want to ensure that your family has food, a roof over their heads, and access to the resources they need to live their best lives. Estate planning can help you do this. Tools like life insurance allow you to guarantee a certain amount of money for beneficiaries.

Clearly delineating who gets what in your will can ensure that your assets go to the people who need them the most.

Consider, for example, what happens to your house when you pass away. To ensure that control of the house is kept by the right person, or that the value of the house is appropriately distributed, you’ll need an expert in real estate law.

From there, you’ll need to determine who should get the house, or how its value should be distributed. When you haven’t planned your estate, this can be left up to chance - not a chance you want to take.

It Helps You Avoid Conflicts

Everyone’s heard horror stories of families fighting over a will before the body is even cold. That’s a terrible situation that you wouldn’t wish on anyone. Estate planning helps rectify this because there can be no question about your desires; they’re written in black and white.

Now, that doesn’t mean you shouldn’t have discussions with your loved ones about your estate plans - in fact, it means quite the opposite. Be frank with your plans, and don’t make efforts to hide your will or how your assets should be distributed. 

You might find out, for example, that the heirloom you intended to pass to one family member isn’t one they particularly want or need. You may then learn that another family member would like that heirloom very much. 

Dialogue is key in all relationships - especially when it comes to estate planning.

You Can Be A Philanthropist

You might find while planning your estate, that your loved ones are more than taken care of. That’s a beautiful thing. You may, then, decide that you want to do good in the world with your remaining wealth. 

Find a charity (or charities) that does work that you find meaningful. From there, you can create a trust in which the entities you choose have paid dividends over the years. Using this method, the amount you give to charities can far exceed the initial amount you put into the trust - as long as the trust grows, so too will your contributions to the charity.

Your Beneficiaries Will Get More Money

Proper estate planning isn’t just about figuring out who gets what - it’s about determining the most effective way for them to get the money. In other words, proper estate planning means getting the most bang for your buck.

Life insurance is an extremely popular tool in the estate planning toolbox. Almost all payouts from life insurance are tax-free, which can seriously reduce the tax burden on your beneficiaries.

Trusts are another tool in the kit. Amounts that you put into a trust don’t have to remain static - they can be invested, just like we discussed above. That means that even after you pass away, the wealth you leave for your beneficiaries can continue to grow - particularly handy if you’re among the more financially savvy members of the population.

There’s also a lot of legal and technical knowledge you may need to plan your estate so that your beneficiaries won’t see penalties. Estate planning ensures that all of your wealth transfer will be above board, legal, and as tax-free as possible.

In conclusion, estate planning is not just for the wealthy; it's a crucial step for anyone who wants to ensure their assets are managed and distributed according to their wishes after they pass away.

Beyond simply outlining who gets what, estate planning provides a structured approach to protect loved ones, prevent conflicts among family members, and maximize the value of your legacy.

By setting up a comprehensive estate plan, which may include wills, trusts, and life insurance policies, individuals can safeguard their family's financial security and maintain control over how their assets are distributed.

This proactive approach helps avoid legal complications and ensures that beneficiaries receive their inheritances efficiently and tax-effectively.

Moreover, estate planning offers an opportunity to support charitable causes close to your heart, allowing you to leave a lasting impact on the world beyond your immediate circle.

Whether you're planning to provide for family members, contribute to charitable organizations, or both, estate planning empowers you to make deliberate decisions that reflect your values and goals.

Ultimately, the peace of mind that comes with knowing your estate affairs are in order and your loved ones are protected is perhaps the greatest benefit of all.

Taking the time to plan now can alleviate stress and uncertainty in the future, ensuring your legacy is handled with care and following your wishes.

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