If estate planning had a different name, like planning for aging or planning for sickness and death, people might not think that an estate plan is only for wealthy people. However, the legal term “estate” means everything you own. A humble homeowner needs an estate plan as much as, or maybe more than, a person who lives in an estate.
Even if you don’t have a fancy house or an art collection, you need an estate plan. This is to protect your family and ensure that the things you own, like a house or bank accounts, pass to the people you want them to. We spend more time planning dinner parties than we do estate plans, but this is something that deserves your full attention.
Investopedia asks you to consider these four reasons why you should have an estate plan to avoid potentially devastating results for your heirs in its article “4 Reasons Estate Planning Is So Important.”
Wealth Won’t Go to Unintended Beneficiaries. Estate planning may have once been considered something only rich people needed, but that's changed. Everyone now needs to plan for when something happens to a family's breadwinner(s). The primary part of estate planning is naming heirs for your assets. Without an estate plan, the courts will decide who will receive your property.
Protection for Families with Young Children. If you are the parent of small children, you need to have a will ensure that your children are taken care of. You can designate their guardians if both parents die before the children turn 18. Without a will and guardianship clause, a judge will decide this important issue.
Avoid Taxes. Estate planning is also about protecting your loved ones from the IRS. Estate planning is transferring assets to your family with an attempt to create the smallest tax burden for them as possible. A little estate planning can reduce much or even all of their federal and state estate taxes or state inheritance taxes. There are also ways to reduce the income tax that beneficiaries might have to pay. However, without an estate plan, the amount your heirs will owe the government could be substantial.
No Family Fighting (or Very Little). One sibling may believe she deserves more than another. This type of fighting can turn ugly and end up in court, pitting family members against each other. However, an estate plan enables you to choose who controls your finances and assets if you become mentally incapacitated or after you die. It also will go a long way towards settling any family conflict and ensuring that your assets are handled in the way you wanted.
An estate plan protects you, your family and your assets. The idea of a court-appointed person making decisions about your property and your children should be enough to motivate you to meet with an estate planning attorney.
Reference: Investopedia (May 25, 2018) “4 Reasons Estate Planning Is So Important”