6 important reasons to make an Estate Plan

Life is uncertain. While nobody likes to think about their mortality, the fact is that everybody will pass away someday and leave assets to someone else, making it vital to create an estate plan. However, when you hear the word ‘estate,’ you might think of huge stock portfolios, mansions, art and antiques, and other costly possessions like yachts and fine jewelry.

Whereas, in reality, your estate is essentially everything you have, including your home or other properties, bank accounts, investments, furniture, life insurance, car, and other personal possessions. Making an estate plan helps you get a say in how these things are distributed to people or organizations you care about. It assembles your affairs and puts a written record of your intentions and wishes.

Still unsure why you should make an estate plan? Here are some significant reasons to create an estate plan.

1. Prevent probate

When you pass away without a will, this means you’ve died ‘intestate,’ and the regulations of the state where you live and own property decides what happens to your assets and who gives them away. The probate court will call a representative to allocate your assets.

This process includes paperwork and court appearances by lawyers, and the estate pays its costs. It can be time-consuming, taking several months or even years. However, you can help your inheritors by creating a will that outlines what should be done to your assets.

But what if you pass away without creating a will? In that case, your loved ones can get help navigating probate by opting for probate document preparation services, gain clarity and make this process hassle-free.

2. Avoid big taxes

You might have already figured it out; creating an estate plan is all about protecting your loved ones.

As a result, this means, in part, providing them with protection from the Internal Revenue Service (IRS). Crucial to estate planning is moving assets to heirs intending to make the tiniest possible tax burden for them.

Hence, creating an estate plan can allow you to reduce much or even all of your state and federal taxes and state inheritance taxes.

Besides creating a will, how else can you avoid or minimize estate tax? Consider making charitable gifts while you’re still alive. Any contributions you make during your life will help decrease your total estate value and do something great for the world and your family.

3. Eliminates family disputes

Everyone has heard stories. Someone without an estate plan dies, and a war between family members starts. One family member might think they deserve more than the other, or one sibling might believe they should be handling the finances even though they’re famous for messing up the finances. Such quarreling can get ugly and end up in court with family members opposed to each other.

Preventing fights before they begin is another crucial reason why creating an estate plan is vital. This allows you to pick who controls your assets and finances after you pass away. Not just that, it also goes a long way toward alleviating family conflict and ensuring that your resources are managed as planned.

Besides that, creating an estate plan allows you to make individualized plans if required-to, arranges for a child with health conditions, or set up a trust for someone who might be better off not receiving a chunk.

4. It goes beyond a will

Many individuals think of a will and an estate plan as the same thing. However, they’re not. Even though will and estate plans give instructions for how your assets and resources should be managed after your death, estate planning consists of much more. It can also include:

  • Medical instructions to define the kinds of medical treatment you want (or don’t want) if you somehow get incapacitated.
  • Lasting powers of attorney to employ individuals to make financial choices on your behalf if you’re incapable of delivering instructions yourself.
  • Beneficiary descriptions describe who should get money from life insurance plans, retirement accounts, annuities, and other financial accounts.

5. Cares for your children

Have you thought about who’ll get custody if you pass away without a surviving spouse to protect and care for your children and other dependents?

Without creating an estate plan, the probate court will choose a legal conservator or guardian for them, usually a family member like a grandparent as the guardian.

On the other hand, a third party, like a family friend, can request the court to be chosen as the guardian.

But what if a minor kid has no surviving family members and no third party wants to step forward? In that case, the court will give custody of your children to an unknown person or family. So, do you want that to happen to your children in case of your untimely death?

If you want the authority to decide who will take care of your children in the event of your death, you need to distinguish that person in your estate plan. Not just that, it’s always a good idea to name an alternate guardian in case something happens to your first option.

6. Allows you to plan for your needs

Remember, creating an estate plan doesn’t only come in handy after you’ve passed away. It can also include a healthcare proxy and durable power of attorney. These two essential legal documents ensure your wishes are carried out if you’re permanently or temporarily incapable of handling them.

A durable power of attorney chooses a trusted relative or friend to oversee your legal and financial matters if you can’t manage them independently.

On the other hand, a healthcare proxy allows someone to make healthcare decisions if you cannot communicate them yourself. It will enable you to discuss your wishes with those you trust, ensuring your wants and needs are met.

Final thoughts

If you’re unsure why creating an estate plan is essential, check out these reasons. Look at the practical reasons mentioned above and see how making an estate plan ensures your wishes are carried out while you’re alive or when you pass away.