When you think of estate planning, images of older adults who have acquired wealth and property come to mind. However, planning for your future estate is never too early or too late. Estate planning is a broad term that includes any action you take as an adult to manage your assets and properties when you no longer can. It also involves assigning someone as your legal representative after you pass away. Creating an estate plan is the best way to ensure that your wishes are met, and those you love the most are taken care of after you’re gone. Here are the reasons why estate planning is important, regardless of age.
Protect Your Financial Future
Your estate plan is a road map for your financial future. It will help you decide what happens to your property and assets after death. This is especially important if you have children who may be minors at your end. In addition, if you are married, it will also help determine how much of your property will go to your spouse and whether or not they will receive any spousal support. Furthermore, estate planning can also serve as a means of avoiding probate court after you pass away. Probate is the court-supervised process that ensures that all property is accounted for and distributed according to the deceased’s wishes.
Avoid Tax Liability
If you are single, then when you die, no tax liability will be associated with your estate. However, if you are married, at least half of what comes into your possession during the marriage becomes part of an estate upon death and becomes subject to taxation and probate costs. In addition, if one spouse dies without a trust in place, the surviving spouse becomes responsible for paying any taxes due on any assets that both spouses jointly owned before their death. Estate planning can help avoid this situation by setting up trusts that can reduce or eliminate tax liability on purchases inherited by beneficiaries after the end of the owner(s). Furthermore, these trusts can also help avoid probate costs because they are typically designated as a “pay on death” account.
Avoid Probate Costs
If you have an estate worth less than $50,000, you can avoid probate costs using a revocable living trust. However, if your estate is worth more than $50,000, you will still be required to go through the probate court process. Probate costs can be considerable and can include attorney fees for preparing documents, appraisals for valued assets like real estate or stocks and bonds, and probate fees which are typically anywhere from 3-5% of the estate’s total value. If you have put off preparing a will until now, you are already at risk of paying these costs because there is no guarantee that your heirs will agree on how to divide up your assets.
It’s important to be proactive when it comes to estate planning. However, you should also seek the advice of an experienced estate planning attorney when creating a will or trust.