Estate planning is a topic that often evokes mixed emotions. For some, it’s a daunting task that brings up uncomfortable thoughts about mortality. For others, it’s an empowering process that allows them to take control of their legacy. Regardless of where you fall on this spectrum, understanding estate planning is crucial for anyone who wants to protect their family, their assets, and ensure their wishes are carried out after they’re gone. In this extensive guide, we’ll explore what estate planning is, why it matters, and how you can create an estate plan that secures your legacy and protects your loved ones.
What Is Estate Planning?
Estate planning is more than just drafting a will or deciding who gets your possessions when you pass away. It’s a comprehensive approach to managing and distributing your assets during your lifetime and after death.
Estate planning involves making important decisions about your finances, healthcare, and legacy while you’re still able to do so. It’s a proactive way to ensure that your wishes are respected and your loved ones are taken care of, even when you’re no longer around to make decisions.
The Importance of Estate Planning
Why is estate planning so important?
- It protects your beneficiaries and ensures your assets are distributed according to your wishes.
- It prevents the additional stress and trauma your loved ones will experience if they have to sort out your affairs.
- It minimizes taxes, expenses and legal fees, preserving more of your wealth for your heirs.
- It allows you to make healthcare decisions in advance, relieving your loved ones of that burden.
- It can prevent family disputes and legal battles over your assets.
- Knowing your affairs are in order provides peace of mind.
Why Estate Planning Matters for Everyone
Many people mistakenly believe estate planning is only for the wealthy or the elderly. However, the truth is that estate planning is important for everyone, regardless of age or financial status. Let’s explore why estate planning matters for different groups of people.
Young Adults and Estate Planning
If you’re a young adult, you’re likely thinking, “It’s too early to worry about estate planning.” But that’s simply not true. There are plenty of compelling reasons to create an estate plan—even if you don’t have much in the way of assets.
Things to consider:
- Who would make medical decisions on your behalf if you’re incapacitated by an accident or illness? Shouldn’t you ensure that it’s someone you trust?
- What would happen to your digital assets? That includes your photos, social media accounts, websites, files — essentially, anything that can be stored in the cloud or on a hard drive. Will all that be managed according to your wishes? You can ensure it is if you create an estate plan.
- What will happen to any assets you’ve accumulated, such as savings or investments? Could they help someone in the family? Could they benefit your favorite nonprofit or cause? What about any collectibles or treasured heirlooms?
- Who’s going to take care of your pets? Will they go to a good home, or be sent to a shelter? If you create an estate plan, you can ensure your pets will be well cared for by someone who loves them as much as you do.
Estate Planning for Families
Estate planning takes on additional importance when children, spouses, dependents and loved ones are involved.
Things to consider:
- If something happens to you, who will care for your minor children? Do you feel comfortable leaving this decision up to complete strangers? An estate plan allows you to name someone you trust, as well as set aside protected assets for their education and care.
- Do you have dependents? Are you responsible for someone who needs care? What would happen to them after you’re gone? With an estate plan, you can arrange for their future.
- Will your spouse or long-term partner have access to your assets if something happens to you? Will they be able to afford the family home and the expense of caring for the family? If you die without a will, the courts will freeze your assets, potentially for years, as they seek to establish next of kin. They may even lock out your spouse. An estate plan allows you to prepare for the unthinkable and maintain financial continuity.
- Will your assets be distributed equitably among your heirs? Have you made provisions for children, stepchildren, grandchildren, great-grandchildren, nieces and nephews?
- What kind of taxation will your assets face? Unplanned or poorly planned estates can lose more than half of their value to excess taxation! An estate plan allows you to take steps to minimize the impact of estate and capital gains taxes and preserve wealth for future generations.
Single Individuals and Estate Planning
Many single individuals, especially those without children, think they don’t need an estate plan. But estate plans are applicable to everyone—individuals as well as families.
Things to consider:
- Who would make medical and financial decisions for you if you’re incapacitated by an accident or illness? An estate plan allows you to designate powers of attorney, like a trusted sibling, parent, cousin, partner or close friend.
- What would happen to your beloved pets? You can make provisions for their care with an estate plan.
- What would happen to your assets if the unthinkable happens? Could they help someone you care about, or benefit a cause to which you’re committed? If you die intestate (without a will) and the courts cannot identify your next of kin, the state government gets all your assets.
Women and Estate Planning
Women must pay careful attention to estate planning. Over the last half-century, women have gained a more prominent leadership role in society. But their approach to estate planning has not yet caught up with these important gains.
Things to consider:
- Women generally love longer than men. That means they often spend more time and resources on long-term or end-of-life care. An estate plan allows you to prepare for these expenses.
- Women frequently head up households. In the event of a tragedy, who would gain custody of your children? Will enough assets be available to maintain housing, education and care?
- A large percentage of the world’s wealth is now held by women. An estate plan can ensure the equitable distribution of assets, minimize legal fees, and avoid unnecessary taxation.
Don’t Delay: Get Started Today
Clearly, making an estate plan is important for everyone. Don’t put your family’s future (and your own legacy) at risk. Would you rather be remembered for easing your loved ones’ burden in their time of grief, or for adding to their trauma by making them sort out your unnecessarily complicated affairs while they’re in mourning?
Learn how to create an estate plan and shape your legacy today. You can protect your loved ones, prepare for the future, and even help support your favorite charities through planned gifts.
