When you hear the words “estate planning,” your reaction may be that it’s only for millionaires and billionaires. This could not be further from the truth.
Estate planning is the process of settling your affairs after you are gone to ensure assets pass to whomever you desire in an efficient manner. While most of us do not like to focus on our mortality, the cost of not having an estate plan in place can be costly and time consuming for your loved ones.
One of the main advantages to having an estate plan is the protection it offers for your heirs and beneficiaries. This is especially important when there are minor children to consider.
One of my clients, who had four young children at the time, was ready to leave on a trip and needed to change their guardianship designations. The clients had hand written a will in the airport parking lot and left it in the glove box of their truck. Not typically an ideal situation, but it sufficed at the time. A formal will was written with an attorney later.
Another example could be reviewing beneficiary designations regularly on your life insurance policies, retirement plan and IRA accounts to ensure these will pass to whom you intend them to. These planning and investment vehicles are common to a vast majority of households and would meet the definition of estate planning.
Another advantage of having an estate plan is the efficiency it allows in leaving your assets to your heirs or beneficiaries. Those who die without a valid will is known as intestate. For those individuals who die intestate, the state has a plan of how their estate will be distributed. It is likely the state’s plans will differ from how you plan to leave your assets.
Furthermore, dying intestate could mean your heirs potentially paying higher costs for the state to administer your estate and could result in your heirs paying higher or unnecessary estate taxes.
The estate planning process is often uncomfortable and overwhelming. Having a team of professionals including your CPA, estate planning attorney and certified financial planner professional can help to ease some of these concerns and assist with setting up your estate plan. There’s no time like the present to get started.