Why Estate Planning is So Important For Your Heirs
Estate planning is usually a neglected part of financial planning as no one wants to think about their remaining time alive. According to Legal Zoom, 55% of all American adults don’t have a will or estate plan in place. But estate planning is so important when it comes to protecting your loved ones. It is not just for wealthy individuals either. You need to have a plan in place or it could have a negative impact on your family for the long-term.
Here are four benefits to estate planning and being prepared for your future.
Assets Are Transferred to Correct Beneficiaries
Regardless of your financial situation, you should have a will to ensure your personal belongings and assets end up with the correct beneficiaries. You work your whole life to earn, save, and invest in the stock market and real estate. Without an estate plan in place, all your hard work could be for nothing.
One of the biggest components of estate planning is designating heirs for your assets. If you do not have an estate plan or will in place, the court will make the decisions for you. This could mean your assets go to the wrong people and your original beneficiaries are left with nothing.
Retirement funds and life insurance policies typically let you name beneficiaries for a particular asset but many are left without a beneficiary or spouse listed.
Make sure to review your beneficiary information after life changes such as children, marriage or divorce. This will ensure your assets will end up where you want them to go.
Protect Your Family
If you have children under 18 estate planning is even more important. Your will contains the guardian of your children in the event that both parents die before the child turns 18 years old. Without it, the courts will try to make their best decision on who should become the guardian. This person will normally be responsible to look after any potential inheritance as well.
Taxes are another important aspect of estate planning as you don’t want your family and loved ones to deal with the burden of taxes while mourning. With a little bit of planning, you can save your heirs a ton of money on taxes.
For a sizeable estate, you can also set up a trust and appoint a trustee to distribute your wealth. With an irrevocable trust, the assets no longer belong to you but instead the trust itself and are not subject to estate taxes. The only taxes it would be responsible for are income from dividends or interest. Another way to ensure the money stays in the family and minimizes taxes is to gift your heirs while alive. The IRS allows you to give up to $14,000 per person, per year in tax-free gifts.
Without a will or estate plan, the court will make the decisions for your family in the process known as probate. Probate is often a lengthy and confusing process that can take more than a year to complete. You also lose privacy of your financial affairs as anyone can access information from probate court and attorney fees can add up quickly. One of the major tax benefits of an estate plan is to help your family avoid estate tax and stay out of court.
You need to have a plan for the future of your estate. Ignoring it will leave your loved ones with even more stress at an already difficult time. Your estate plan will make sure your heirs and beneficiaries will avoid unnecessary taxes and probate court. Protect your assets and contact Bayntree so we can coordinate with a licensed Estate Planning Attorney on your behalf.
Do you have questions about how to set up a proper estate plan? Simply request a call from a Bayntree financial advisor today.
Bayntree Wealth Advisors, located in Phoenix and Scottsdale, Arizona, provides comprehensive financial planning and wealth management. The Bayntree team specializes in all aspects of financial health, including retirement planning, risk management, investment advice, tax strategies, estate planning and insurance.
Bayntree does not provide specific legal or tax advice. Please consult with your tax advisor or legal professional for guidance with your individual situation.