When we hear the term “estate plan,” we often picture wealthy families squabbling over vast fortunes and businesses. But the truth is, every adult needs an estate plan in place. It’s not about the size of your bank account but about planning what happens to your kids and assets when you pass away.
With the right estate planning tools, you can meet your final wishes and make things easier for your loved ones after you’re gone. From reducing the tax burden to ensuring your children are cared for, there are numerous reasons why estate planning is essential for everyone. In this article, Puia Wichman explores how estate planning can benefit you and those closest to you.
Planning for the future can be difficult, but creating an estate plan can ensure that your assets, finances, and personal affairs are managed the way you desire. Estate planning isn’t just for the wealthy but for anyone who wants to protect and provide for their loved ones. Estate planning can include defining beneficiaries, setting up trusts, and reducing the tax burden on your estate. By planning your estate, you can give yourself and your loved ones peace of mind in the event of mental incapacity or death. Puai Wichman stresses the importance of having clear instructions for your family and loved ones, reducing the risk of financial stress and disagreements. An estate plan is crucial in providing financial security and fulfilling your wishes.
Estate planning protects beneficiaries.
In the face of unexpected events such as mental incapacity or death, estate planning can provide peace of mind for you and your loved ones. One crucial aspect of estate planning is ensuring that your assets are distributed as you wish after you pass away. Leaving your heirs with easy access to these assets is part of this process.
Several tools, including life insurance policies, are available if you’re looking for estate planning options. These policies pay out a death benefit to your beneficiary after your passing, ensuring they have the financial support needed to cover important expenses like final costs and future education for their children. While it’s never easy to think about the end of life, taking steps to ensure your loved ones are cared for can provide comfort for years.
Estate planning names a legal guardian for minor children.
As a parent, your top priority is the safety and well-being of your children. Part of ensuring that they are cared for in the event of your untimely passing is specifying a guardian for them in your estate plan. It’s not a topic anyone likes to dwell on, but the consequences of not taking action can be dire. Puai Wichman says that without a chosen guardian, the court will have to decide who will take care of your children, which can be a traumatic experience for both parents and kids. And in the meantime, while a guardian is chosen, your children may not have the comfort and security of being with someone they know and trust. So, by taking the time to prioritize a guardian for your minor children, you can have peace of mind that their future is in the hands of someone you have chosen and who will care for them as you would.
Estate planning protects your assets.
It’s easy to assume that your assets will automatically go to your spouse and children when you pass away, but things can quickly become complicated without proper estate planning. Each state has laws; if you don’t have a will, those laws will dictate who receives your assets. While your spouse and blood relatives are usually first in line, there are situations where other individuals or organizations may be entitled to a portion of your estate. By creating a will and exploring other estate planning resources, you can ensure that your assets are distributed in a way that aligns with your wishes.
The Probate Process
It’s a common misconception that your closest blood relative will automatically inherit your assets if you don’t have a spouse or children. It may not be the case in many states. Instead, Puai Wichman explains that your estate may go through the probate process, which can be long and complicated— not to mention costly. However, there are ways to avoid or minimize the probate process. For example, New York allows accounts with named beneficiaries to bypass probate, so it’s worth exploring these options. Considering these factors, you can ensure that your beneficiaries quickly access your assets and that your estate is handled according to your wishes.
Estate planning provides tax relief.
Estate taxes can be a headache for anyone planning their finances. Once the value of your estate is past a certain point, the federal government steps in to collect its share. However, there are a few legal tools at your disposal that can help you avoid these taxes. One of those tools is irrevocable trust. While you can’t change the contents of the trust or the beneficiary once it’s established, you can ensure that it won’t be included when your estate is calculated. Another useful option is making lifetime gifts. Any gifts you give while alive won’t be part of your taxable estate. Utilizing these tools can minimize the impact of estate taxes on your wealth and leave more for your heirs to enjoy.
Estate planning simplifies things for your family.
Death can stir up many emotions and difficult conversations among family members, especially with no will or other directives. And while the assumption may be that it always has to do with money, many other factors are at play. In particular, blended families with ex-spouses, new spouses, biological children, and stepchildren can complicate matters. Different states determine heirs differently, so not having a will could mean accidentally excluding someone you care about or including relatives you never intended to. Even if you have a life partner, your assets may not go to them if they aren’t your beneficiary. In the end, Puai Wichman mentions that creating a will and other directives may save your loved ones a lot of heartache and ensure your wishes are followed.
Puai Wichman is the founder and CEO of Ora Partners, an international trust provider and wealth management firm dedicated to helping families and individuals protect personal and corporate wealth.