Estate planning involves making decisions and leaving a will about what happens to your assets after you die. It is a big decision and an important part of life. Leaving a will and smart estate planning will help your children and loved ones avoid a lot of problems and financial burden in the form of estate taxes.
This is particularly useful if you have young children who are not capable of going through a court process to get their inheritance. In this piece, we will cover several reasons why estate planning is important to ensure that your loved ones are taken care of, and are able to get on with their lives easily.
Choose Who Inherits Your Assets
If anything happens to you then your assets and estate should go to the people you want them to go to and as quickly and seamlessly as possible. In the absence of an estate plan, the decision mostly ends up in court where the judge will decide who your assets should go to. The probate process can take months and years before it resolves. It could drag your loved ones through a long and difficult litigation process that should be avoided.
The estate and assets of people who do not leave a will is settled through intestacy law. This law is different in each state and the judges often distribute the estate in accordance with default rules. The spouse or civil partner of the person inherits a sizable portion followed by children, grandchildren, and others.
Protect Your Heirs
If you have children or adult dependants, then you will want to make sure that their lives are not disrupted by your untimely demise. Planning your estate and setting up a trust fund will ensure that your survivors will have a regular income. If you have young kids, the trust fund will help take care of them until they come of age.
Appoint a Guardian
Appointing a guardian goes in line with setting up a trust fund for your heirs. The administrator will manage the assets that you place in the fund and distribute them to your heirs according to your instructions. A trust fund allows the beneficiaries to avoid the probate process and ensures that their needs are met in case of lengthy litigation going on for the estate.
Setting up an estate plan will also help your heirs avoid inheritance and death taxes. These taxes can go up to 40% of the total estate value. The taxes can take away a big chunk of your overall estate which means that you will be leaving significantly less for your heirs.
There are a number of ways to avoid these taxes. You can set up trusts, charity funds, or directly name beneficiaries on your insurance policies and funds to keep them separate from your total estate.
Family Inheritance Issues
It is not uncommon for families to bicker and fight over inheritance and who get what when the head of the family passes away. You certainly don’t want your lack of planning to be the cause of fighting in the family.
When you have an estate plan in place and have it communicated to your family members, they will be far more accepting of the distribution of assets. One good way to do this is to choose someone to be in charge of handling the estate after you die. Not only will this ensure that your assets are handled as you want, it will also keep things from getting ugly within the family.