Estate planning is important for everyone regardless of wealth or family status because if you become incapacitated or pass away without an estate plan, you are leaving the distribution of your assets subject to state law – and the results may not be what you want or expect.
Estate Planning Explained
Estate planning includes the growth, protection, and transfer of a person’s wealth through the creation and maintenance of an estate plan. The concept of estate planning is important and twofold: (1) to have a strategy that will maintain your financial security during your lifetime, and (2) to ensure that your intended transfer of property and assets occurs upon your death. Both of these issues are analyzed through the lens of the unique situation of the family and the possible expense of different methods used in the estate plan.
Benefits of Estate Planning
There are several benefits to having an estate plan. At a minimum, an estate plan provides clear written guidance to your loved ones on what to do with your assets when you are deceased. But perhaps the most important reason is to be in control of how your family is provided for in the event of your death or incapacity. Estate planning can address several issues including:
- Who will raise your minor children,
- Who will inherit your assets and how they will be distributed,
- Who will care for loved ones who are unable to care for themselves,
- Who will care for your pets, and
- Who will receive your life insurance and other insurance proceeds.
Finally, good estate planning can ease the time-consuming, administrative strain placed on your family during an already difficult time.
Estate Planning Statistics
According to studies, 6 in 10 adults have not put a will in place. And, while many have likely heard that it is wise to avoid probate – the legal process by which the assets of a deceased are disposed of under court supervision – many do not understand why probate should be avoided. Three main issues with probate include: (1) the tying up of the decedent’s assets for months or even years while the probate is open, (2) the cost, sometimes as much as 5 percent of the estate’s value is spent on attorney and court fees alone, and (3) the loss of privacy in the probate process when it comes to the decedent’s financial information.
There are many financial and legal tools that may be used in the estate planning process.