If you are like most people, you probably harbor the misconception that estate planning is a preserve of the rich. However, you should realize that it is an important consideration for anyone who owns assets. Another misguided belief you probably have is that you should start estate planning when you are an old retiree spending your days in a retirement home.
But frankly speaking, a sizeable number of people will not have the luxury of living out their final years, having a good time with their grandkids because life is messy and unpredictable. Tragedy strikes when you least expect it. It would, therefore, be in yours and your family’s best interests to be prepared for any eventuality.
Here are eight reasons why estate planning from an early age is the best decision you are about to make:
1. You Decide Who Gets What
Whether you are rich or not, you must be owning some assets you would like your family to have if you died. Things like the family home, financial investments, or valuable items are part of your estate. If you die or get incapacitated, these assets will be divided among the beneficiaries you designate.
If you do not have an estate plan, it will not be clear how your property should be divided necessitating judicial intervention. The state gets to decide how your property will be distributed. If you have personal preferences as to whom you want to inherit what part of your assets, you need to start planning early.
2. You Take Care Of Your Own Needs
In addition to dividing your assets, an estate plan can also protect your personal (physical body and legal entity) if you become incapacitated – unable to make your own decisions. It allows you to appoint someone you can trust – a conservator – to make decisions pertaining to your health and finances if you cannot make them by yourself any longer.
To handle this, draft a durable power of attorney that will be part of your estate plan. A durable power of attorney is the document that appoints a conservator. You will require the services of a conservatorship attorney to help you with this part of the estate plan.
Take care of this while you are still young and healthy to avoid having a court-appointed conservator handling your personal affairs.
3. To Cater for Philanthropic interests
If you want your personal wealth to be channeled to a philanthropic cause when you die, plan ahead. Make the allocation in your estate plan and let your family members know what you are about to do so that they can support your decision and respect your wishes.
4. To Protect Your Children’s Interests
If you have children who are still very young, you need to decide how they will inherit your assets when they come of age.
To protect your children’s interests, estate planning allows you to:
– Appoint a Conservator
You should not leave this decision to chance. If you die while your children are still very young, a conservator will act as a fiduciary of the inheritance on your children’s behalf until they come of age.
– Decide when your children will inherit
You can activate a clause that determines at what age your children will take over trusteeship of your property. Ideally, they should inherit when they are old enough to make sound decisions. This is a safety measure.
– Keep your property within the family
If your spouse remarries, you can decide to prevent your assets from going to the new family and instead benefit your children and grandchildren solely.
5. Avoid High Taxation
If you are a wealthy person, estate planning can help you minimize the amount payable in taxes when you transfer your assets to your loved ones. The government has been known to extract substantial amounts (in the form of taxes) when a person transfers assets to another person.
These taxes are categorized into gift tax, generation-skipping tax, and estate tax. If you approach this process early, you can draft a good estate plan that will incur the smallest tax burden. Failure to plan leaves your heirs exposed to a large tax burden.
6. Protect Your Heirs from Unexpected Lawsuits
Estate planning can protect your property from lawsuits. When you transfer your wealth, you seal a loophole that some people like to exploit in the form of unexpected lawsuits. This is particularly important if you work in an industry where legal action is very common. By transferring your property to another party, you can prevent other parties from coming after your estate. Estate planning can enable you to secure your property against creditors.
7. Avoid Long Court Processes
If you work on a good inheritance plan, you can save your beneficiaries from the rigors of a court-supervised allotment process. Writing up a will is also not enough because the document has to be authenticated by the court before it is enacted. Will authentication (also known as probate) is a long and costly process that your loved ones should not have to endure. Consult with your estate planning attorney to create a smooth asset transition process that will save your loved ones the trouble of going to court.
8. To avoid Family Conflict
Family members fighting over inheritance are, sadly, very common. It is always caused by a lack of planning on the part of the benefactor. As part of your estate planning, you should appoint someone to take control of your inheritance when you become incapacitated or die. The trustee will expedite the process and help avoid conflict.
There should also be clarity in everything; delineate who gets what, how they get it, and when they will get it. This way, no one will go to court or fight other members of the family over what they think they deserve.
Deciding who will inherit from you is an important decision; one you do not want to leave to chance and public scrutiny. If you own assets, start planning how your estate will be divided if something tragic ever happens and takes that away from you. You are better off starting at an early age and revising your plan along the way than doing nothing and leaving your family clueless when you die.