We commonly throw the word “estate” around for the top tier wealthy class, however, estate planning isn't reserved just for the rich. Everyone, regardless of family dynamics or financial status can benefit from having an estate plan – a collection of documents that specify how you want your assets distributed. End-of-life planning seems morbid, but having an estate plan in place can protect you and your assets not just after you die but during your life as well. Here's a few tips when to start your estate plan:
To Plan for Your Own Needs
After estimating your cash flow needs leading up to retirement and beyond, think about what insurance you may need if you're no longer able to provide for yourself. Additionally, consider designating a healthcare proxy or power of attorney who can make medical and financial decisions on your behalf if necessary. Discussing your intentions with those you trust can help ensure that your wishes and needs are met if you're eventually unable to speak for yourself.
To Dispose of Wealth in the Manner You Wish
If you choose not to have a documented estate plan, the state typically decides how your assets are distributed after you die. By creating an estate plan or some sort of documentation can save your family members time and frustration and will help ensure that your assets are dispersed in the manner you wanted.
To Minimize Transfer Taxes
If you or your family has accumulated a substantial amount of wealth and you plan to transfer it to the other family members or loved ones upon your departure, the estate planning process can help you develop an approach in the most tax-efficient way.
There are three types of taxes to consider when transferring your money:
The estate tax
Generation- skipping transfer tax
Since the IRS limits how much money you can transfer and to whom without being taxed, a good estate plan outlines a wealth transfer strategy to minimize the taxes owed by you or your estate.
To Plan for Philanthropic Goals
Legacy planning is often included in the estate planning process to shape the way you are remembered after you die. This can include establishing your personal philanthropic intentions for the future. The sooner you start to plan, the more you can make your intentions known to your family members and incorporate them into the process.
To Protect Family Wealth
As people grow wealthier, they often become more susceptible to frivolous lawsuits that attempt to capitalize on their hard-earned wealth. Estate planning helps preserve family's wealth by removing your name from your assets and putting them into legally-protected vehicles.
To Prepare Future Generations for the Wealth They'll Receive
Typically, families that are successful in developing the rising generation to be effective stewards of family wealth provide age-appropriate transparency, create a welcoming learning environment and encourage opportunities for involvement. Being open and honest with your family or a financial advisor about your family's wealth can help remove some of the emotion and conflict other family members may associate with money.
Although estate planning can be a complex process the earlier you get started the more prepared you and your family will be to face a variety of challenging situations. Due to the legal complexities of estate planning, it's important to seek an estate planning attorney. Contact David Veliz at Veliz Katz Law today and read the full article by Catherine Schnaubelt at Forbes.