9 Reasons Why You Shouldn’t Ignore Estate Planning

No one likes thinking about the inevitable yet necessary end-of-life preparations that need to be made well in advance of your passing. A comprehensive estate plan includes assurances that your beneficiaries will receive your assets such as inherited wealth , retirement accounts and real estate without issue.

Covering estate planning basics now is much like retirement planning, you put protections in place to make sure you and your family are covered for whatever life throws at you. Creating this coverage with an estate planning attorney is a critical process that many overlook, assuming it’s only for the wealthy or elderly.

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However, regardless of financial status or age, everyone can benefit from a well-thought-out estate plan and help their loved ones with specific beneficiary designations. Here are nine key reasons why estate planning is important .

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Protecting Your Assets and Your Loved Ones

One of the primary reasons for estate planning is to ensure your loved ones are taken care of after you pass away. Having a durable power of attorney and a clear estate plan reduces confusion, prevents family disputes and ensures that your assets are distributed according to your wishes. Without a plan, the court decides who gets what and that can leave your family in a vulnerable position.

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Minimizing Family Disputes

By choosing who inherits your assets, you are putting in place a specific plan for your family to follow. When there’s no clear directive about how assets should be divided, it can lead to disagreements and tension among family members.

An estate plan provides a point-by-point set of instructions, avoiding potential fights and more emotional stress in an already heightened situation.

Protecting Your Beneficiaries and Providing for Minor Children

If you have young children, estate planning allows you to appoint a guardian or conservator who will care for them in case something happens to you. This person oversees the minor’s needs until they reach the legal age of 18. Without this legal provision, the court will make this important decision for you, which may not align with your wishes.

Provisions can also be put in place for adult beneficiaries if you are worried about their ability to make good financial decisions. You can put protections around your beneficiary’s inheritance to ensure they aren’t taken advantage of by creditors, negative outside influences or even overbearing spouses.

Avoid Probate

Probate is a legal process where your estate is addressed and administered, which can be lengthy and expensive. However, an estate plan — especially with the inclusion of living trusts — can often bypass or streamline probate, saving your family time and money while allowing for faster asset distribution.

Putting your assets in a trust and having it managed by a trustee means the onus of ownership is on the trust and not you. Upon your death, everything you’ve left to your family goes directly through this trust to your beneficiaries without the hassle of the probate process.

Reducing Taxes

Although death and taxes are both unavoidable, the latter can certainly be reduced. Estate planning can help minimize the taxes your estate may owe, leaving more for your heirs. Certain strategies, like gifting during your lifetime or setting up trusts, can reduce estate tax liabilities and protect your wealth for future generations.

Ensuring Business Continuity

If you own a business, estate planning is crucial to ensure its smooth transition. You can outline how the business should be managed or passed on, whether it’s to family members, partners or outside buyers, safeguarding its future and protecting the livelihoods of employees. This can give you peace of mind that your wishes for the business you built are being upheld.

Medical Decisions That Plan for Incapacity

An often overlooked but vital aspect of estate planning is appointing someone to make healthcare decisions on your behalf if you become incapacitated. Your estate plan becomes a vital piece of knowing your wishes even before you die. A living will and healthcare power of attorney can ensure that your medical preferences are respected, reducing the risk of not knowing your preferences if you are not able to make your own decisions.

If you become incapacitated due to illness or injury, having a financial power of attorney in place ensures that someone you trust can handle your financial affairs. Without this legal directive, the court may appoint someone to manage your finances, which might not align with your preferences.

Leave the Legacy You Want

Beyond the logistics of asset distribution, estate planning is an opportunity to leave a lasting legacy. Whether you wish to support charitable causes, create a family foundation or ensure that certain heirlooms are passed on to future generations, your estate plan can reflect the values and impact you want to leave behind.

You can also maximize your charitable contributions and provide for charities after your death. Charitable gifts often offer tax deductions not available to other gifts.

How To Prepare for Your Estate Plan

As with any financial planning, you won’t be surprised by the amount of paperwork entailed. Many legal documents go into your specific estate plan and the preparations you are making for your family and loved ones in your absence. Here is some of the paperwork you should start organizing when headed to your estate planning attorney’s office.

• Last will and testament : This legal document outlines how you want your possessions and assets to be distributed to your beneficiaries. It can also depict how you’d like to care for your children and other dependents.
• Living will: As opposed to a last will and testament this is used to define your wishes for medical decisions, end-of-life treatment or terminal illness when and if you’re incapacitated.
• Trust: There are a variety of options with types of trusts you can go with but essentially when you as the trustor give another party, the trustee, the right to hold the title of your assets such as property and finances for your beneficiary.
• Medical Power of Attorney: Also known care proxy, this allows you to choose someone who can make important medical decisions about healthcare on your behalf.
• Financial Power of Attorney: Any POA gives someone else the ability to make financial decisions and execute them as your proxy.
• Life insurance: Adding this to your estate plan can help cover the costs of your loved ones such as lost income, mortgage payments, end-of-life expenses or funeral costs.
• Beneficiary forms: Assets such as retirement plans, whether they are Roth IRAs or 401(k) plans, allow you to name a beneficiary. That way your assets go directly to those you wish and allow those loved ones to avoid probate.

The bottom line is that estate planning is not just for the wealthy or the elderly; it’s for anyone who wants to protect their assets and their loved ones to help minimize stress and ensure their wishes are honored in their absence. By taking the time to create an estate plan, you can provide peace of mind for yourself and your family, knowing that important decisions are in place for your family’s future.

This article originally appeared on GOBankingRates.com : 9 Reasons Why You Shouldn’t Ignore Estate Planning