If you want your assets and loved ones to be protected when you can no longer do so, you'll need an estate plan. Without one, your heirs could face heavy tax burdens and courts could determine how your assets are divided and even who will be responsible for raising your children. Estate planning is about empowering people to make their own decisions about their future and the future of their loved ones. The following are 5 of the most common reasons people decide to create an estate plan.
Estate planning is much more than deciding who to leave your things to, it's about taking care of your loved ones when you're no longer here. Overall, there are two main reasons why you might want to protect your beneficiaries. First, the beneficiaries may be minors, in which case state law (and good practice) requires that a guardian or curator be appointed to oversee the child's needs and finances until they are of legal age (18 in New Mexico). However, as we all know, in some cases, adult beneficiaries also need protection, which brings us to the second main reason why people may want to consult an estate planning lawyer.
In some cases, you may want to protect your adult beneficiary from poor decisions, outside influences, creditors, or even your spouse. You can isolate your beneficiary's inheritance from an authoritative spouse or partner who could waste their inheritance or possibly take it up in a divorce. A will explains how you want your assets distributed after your death and appoints an executor to manage these transfers. Otherwise, you'll die without a will, which means your state decides how to distribute your assets and funds, usually starting with your parents if you don't have children (unless an account, such as your bank account, designates a beneficiary or is maintained together).
Even if you want to leave everything in the hands of your parents, a will streamlines the process, says Jeana Salman, CFP of Atlanta. Most of the time, estate planning isn't a priority until people reach retirement or a certain income level. Otherwise, a person who should no longer be a beneficiary of the estate, such as a former spouse or separated relative, may claim a portion of their estate. At first glance, it's easy to understand some of the reasons why people get it wrong when it comes to estate planning.
Common misconception is that estate planning is only for the rich, but an estate covers much more than your finances. Legacy planning is often included in the estate planning process to shape the way you are remembered after your death. In addition to keeping these documents organized, ensure that your DPA and the executor of your estate have legal access to these documents. An estate plan allows you to have a say in how those things are delivered to the people or organizations that matter to you.
Because the IRS sets limits on how much money you can transfer and to whom without paying taxes, a good estate plan outlines a wealth transfer strategy that attempts to minimize the taxes owed by you or your estate. As children grow older, their financial lives become more complex, and as their assets and needs grow and change, their current estate plan must be reviewed to ensure that it continues to meet their current needs and that any future needs are anticipated. If you don't have a documented estate plan, such as a will or a living trust, the state in which you reside generally decides how your assets are distributed after your death. It's never an easy time to grieve the profound loss of a parent or spouse, but having an estate plan will help the grieving person focus on honoring their memory and overcoming their pain, rather than dealing with legal jargon or emotionally charged disputes with family members.
Creating an estate plan can be awkward (death is a sensitive topic, after all), but having one in place will ensure that your assets are distributed correctly and will reduce any tax burden for the beneficiaries you choose, which may be your children, charities, or other entities. In addition, an estate plan can also specify burial instructions, help design plans in the event of a disability, and allow you to pay your final expenses in advance. . .