According to Legal Zoom, about 18% of U.S. adults over 55 have a will, durable power of attorney, and advance health care directive. Although it may not be ideal to think about the future of your possessions after your departure, creating an estate plan ensures you and your assets are protected during and after your life. For those who haven’t started planning their estate, here are ten pressing reasons to use estate planning services sooner rather than later.
1. Minor Children
When you pass away, who will care for your children? Without an estate plan, the decision will be made by a court, according to Legal Zoom. If you have a plan, you can designate a guardian of your choosing. This reassures you that your children will be in good hands.
2. Children With Special Needs
If a family doesn’t have an estate plan for their special-needs child, that child may lose eligibility for government assistance programs like Medicaid and Supplemental Security Income (SSI), according to KidsHealth. This will force them to use the inheritance to cover care costs. If you have a plan, you can establish a Special Needs Trust for your child to help cover their out-of-pocket costs without affecting their eligibility for government aid.
3. Blended Families
If your family comprises members from multiple marriages, the distribution of your assets can be tricky, according to the American Association of Retired Persons. Without an estate plan, your assets may not be distributed as you wish. With a plan, you decide what will go to your present spouse and the children from a former marriage.
4. Loss of Capacity
What if you become incapable of managing your affairs? According to the American Bar Association, the courts will determine who will manage your affairs without an estate plan. With a plan, however, you get to choose that individual. Being proactive and working with an estate planner can help avoid this matter from going through court.
5. Retirement Accounts
Do you have a traditional 401(k) or an equivalent retirement plan? Not having an estate plan to ensure that your retirement account funds are distributed according to your wishes may result in hefty tax costs for your heirs. Protecting your loved ones includes shielding them from the IRS. An integral part of estate planning is distributing assets to beneficiaries to minimize their tax liability, according to the American Bar Association.
Couples can reduce or avoid federal and state estate taxes and inheritance taxes with minimal estate planning. Additionally, you can employ strategies to reduce the potential income tax burden on beneficiaries. Without an estate plan, your loved ones may end up owing the IRS a substantial sum of money.
6. Dying Without a Will
According to the New York State Unified Court System, without using estate planning services, your possessions will be distributed to your heirs per your state’s intestacy laws (dying without a will). Your family members, possibly not the ones you’d like, will inherit your estate without your guidance or the protection of a trust. With a plan, you determine who receives your assets and under what circumstances.
7. Business Ownership
Suppose you own a business and don’t have an estate plan that names a successor. In that case, you risk having your family lose ownership of the company, according to The American College of Trust and Estate Counsel. However, you can decide who will take over the company when you pass away if you have a plan.
8. To Avoid Probate
According to Experian, without an estate plan, you risk having your assets listed in the public record and could be subject to additional fees and delays (depending on the state). You can avoid probate entirely with an estate plan.
9. Financial Security
According to Forbes, if you were to pass unexpectedly without a plan and the income replacement offered by life insurance, your loved ones might not be able to continue living to the same comfortable standard they are accustomed to. Life insurance, when used properly, can provide financial security for your family.
10. Retaining Assets Within the Family
How much do you want your assets to remain in the family? If your child passes unexpectedly, their spouse may inherit your wealth unless you make other arrangements. According to Legal Zoom, your child’s current spouse may be entitled to half of your estate in case of a divorce. You can protect the future of your family and possessions by establishing a trust that will benefit future generations, such as your grandkids.
If you want your possessions and loved ones safeguarded when you’re no longer capable, you’ll need to use estate planning services. If you depart without one, your heirs may be subject to hefty tax liabilities, and the courts may decide how your assets are distributed and who will care for your children. When you work with estate planning services, you can be sure that your estate will be distributed as per your wishes. Get in touch with Pinnacle Legacy Law today to talk with one of our estate planning professionals.