Do you think of estate planning as something that the really old or wealthy need to take care of? Perhaps you imagine estates equating to lots of antiques, art, mansions, and stock portfolios along with fine jewelry, expensive cars, and even yachts. However, it doesn’t matter what age you are or how wealthy or not you are, if you have anything, and we do mean anything, that you intend on passing on to loved ones and associates when you die, you need to seriously consider estate planning.
To show the importance of estate planning, and why you should consider hiring the team at https://libbybanks.com we are going to highlight some of the key reasons for doing it.
More Than Just a Will
Just as there are misconceptions about estate planning only being suitable for the wealthy and old, there are a lot who hold misconceptions about estate planning and will making being the same things. Although they both include instructions about how your assets and goods should be handled and allocated once you have died, estate planning covers a lot more.
Estate planning may also include, for example:
- Who should get certain powers of attorney so that they can make critical financial and medical decisions on your behind when you are not able to?
- Medical directives outline the medical treatments you don’t and do want when you are incapacitated. Such as DNR notes and No Blood instructions.
- Beneficiary designations that explain exactly who should inherit the money from different financial accounts such as retirement funds, annuities, and life insurance policies, to name a few.
- A number of trusts that facilitate the passing on of property to the heirs and beneficiaries outlined in your will and estate plan may provide tax cuts and benefits for you and them.
It Can Save Money and Time
People who die without a will are referred to as having died intestate. If this happens, the state laws where the person lives will outline what will happen to your various assets, property and who will decide who gets them. The local probate court will be the one that names a representative to handle the distribution of your assets.
In the majority of cases, this falls to the spouse. However, if you do not have a surviving spouse and if there are no other close relatives available for the job, a public trustee will be appointed by the court.
One major problem is that when this is happening, no one is allowed to act on your directives or touch any of your assets. These are frozen until the probate court has assessed every fine detail and applied state laws and then paid off any debts too.
There is a lot of court appearances and paperwork involved in the probate process and it is the estate that pays those fees for lawyers. As well as expensive, this can be time-consuming. Instead of leaving all the hassle and expenses to your surviving relatives and beneficiaries, you should consider estate planning.
Avoid the Bigger Taxes
There is one reason why we understand why estate plans are associated with the incredibly wealthy – estate taxation. Federal estate taxation only really impacts those in the ultra-wealthy bracket of society because the estate tax exemption sits at $11.7m per person, meaning you only have to pay federal estate tax on anything above that amount.
State inheritance and estate taxes are an entirely different matter, though.
A deceased person’s estate pays estate taxes, while the beneficiaries and heirs are expected to pay inheritance tax. Estate plans are the best way to reduce the amount of federal or state taxes on your assets, by setting up irrevocable gifts, trusts, or even creating joint accounts.
