One of the biggest myths about estate planning is that it is something only wealthy people need because the only reason for having an estate plan is to minimize estate taxes. The truth is, estate taxes are only a tiny piece of the estate planning puzzle – and every adult needs an estate plan.
Here are just a few non-tax reasons to plan:
1. Put the Appropriate People in Charge. An estate plan allows you to choose people who can be given authority to make financial and medical decisions on your behalf if you become disabled. It also lets you name your executor, your trustee, and the guardian of your minor children – all the people who will be in charge of making sure your wishes are carried out and honored after your death. Without an estate plan, these people will be chosen by a judge – and they might not be the same individuals you would select – in fact, the judge could select a complete stranger.
2. Distribute Your Assets the Way You See Fit. With an estate plan, the property you’ve worked so hard to accumulate goes to the people you choose, in the proportions you choose, and at the times you choose. If you do not have an estate plan, your property is distributed to your family members according to a scheme provided by state law. No allowances are made for family dynamics, personal preferences, or special circumstances.
3. Protect Your Loved Ones’ Inheritances. Your children’s and grandchildren’s inheritances face all kinds of threats. Without a solid plan, the money and property you pass on to your family members can be eaten away by their financial inexperience, divorce, or lawsuits. Money you’ve earmarked for inheritances can even disappear during your lifetime if you’re faced with nursing home bills. Your estate planning attorney can build provisions into your plan to protect your family’s inheritance from these threats and more.
4. Help Your Business Thrive for Generations. If you own a business, your estate plan should include a solid business succession plan. This increases the odds that your enterprise will make a smooth transition from the first generation of ownership to the second – and beyond.
5. Prevent Conflict and Reduce Stress. The death or disability of a loved one is a stressful time for a family, and it can be fraught with conflict. When you put an estate plan in place, you provide your loved ones with a roadmap for negotiating this difficult period with as little tension as possible.
By: The American Academy of Estate Planning Attorneys