When some people hear the words “estate planning,” they probably imagine it’s something only the very wealthy do. Although it’s true that high-net-worth individuals do typically have a plan for their wealth after they pass on, that doesn’t mean it’s exclusive to the 1%. In fact, if you’ve ever drafted a will, you’ve already engaged in some form of estate planning.
Estate planning is the process of determining what will happen to your money and assets when you die, as well as establishing any instructions for handling the rest of your personal affairs. In addition to writing a will, estate planning can take the form of establishing a trust to hold funds for your beneficiaries, designating the power of attorney for someone to handle your affairs, or determining specifically who your beneficiaries are.
On top of the peace of mind estate planning can give you in the here and now, there are numerous other benefits that can make the process a worthwhile one for you. From protecting your business interests to avoiding family strife, here are some of the most important benefits estate planning can bring for you.
Protecting Your Loved Ones
Perhaps the most common reason for anyone to think about estate planning is to provide for loved ones after he or she dies. By writing a will or establishing a trust, you can ensure that your money and other assets will be distributed according to your wishes. This is especially helpful if your beneficiaries include young children, family members with special needs, or anyone else who may not be able to advocate for themselves.
Although ensuring the distribution of wealth as you want to see it happen is important, another good reason to have an estate plan is to prevent family squabbles in the aftermath of your death. Without clear instructions regarding who will receive what, there’s always the risk of arguments and hurt feelings that could cast an unfortunate pall over your family. Estate planning ensures everyone in your family understands your wishes and has time to come to grips with it so there will be no surprises or conflicts in the days and weeks following your exit.
Reducing Taxes and Expenses
As important as wills and trusts are, they’re not the only aspects of estate planning. A major component of the process is developing strategies for use here and now to protect your wealth in the future. This includes planning for tax strategies, gifts, and charitable giving. For example, a financial advisor can help you reduce your tax burden in the present to preserve more of your money for your beneficiaries. Creating a charitable giving plan also can help lower your tax exposure, allowing you to keep more of your money to invest for the future. In certain cases, creating a trust for a beneficiary can help reduce probate costs and delays that can eat into your estate. With proactive planning, you put your beneficiaries in a better position when the day finally comes.
Ensuring Healthcare and Financial Decisions
We all hope that when the end comes for us, it will be on our terms. Unfortunately, that is not always the case. Death can come suddenly and without warning, leaving someone with no time to get his or her affairs in order and give clear instructions about what their family should do. Estate planning ensures that you have someone you trust who is ready and empowered to see that your wishes will be honored.
Not only is this important for determining how your assets will be doled out, but also for making medical decisions on your behalf. For example, you may not want to be kept alive artificially if you end up in a vegetative state or are otherwise incapacitated. In that event, you would be unable to make your intentions known unless you had already specified them in your will and given someone power of attorney.
Supporting Charitable Causes
Charitable giving through estate planning can be beneficial for your tax situation, but by far the most rewarding aspect is ensuring you leave behind a legacy in your name. Many people choose to establish trusts so their money continues to support the causes nearest and dearest to them even after they’re gone. Another option is to create a donor-advised fund (DAF). This allows you to donate cash or other assets to an organization that manages the fund, at which time you receive an immediate deduction on that year’s taxes. The assets in the DAF can be invested to generate growth, which is tax-free. As the donor, you have the right to give grants from the DAF to whatever eligible public charities you like and potentially establish the distribution of regular gifts in perpetuity.
Business Continuity and Succession Planning
The image many people have of estate planning involves characters on TV fighting over inheritance and control of a family company. Although those soap operas and prestige dramas often exaggerate the wheeling and dealing, there is some truth to the idea that estate planning is important for securing your business.
If you’re a business owner, it can make a lot of sense to include secession planning as part of your estate. This can ensure the family members or partners you want to take the reins after you pass away will be guaranteed their position. It’s a good way to provide a smoother transition free from disruptions or surprises. This means it’s much more likely your employees, customers, and family members won’t suffer the chaos that can come from an unexpected power vacuum in the head office.
Peace of Mind
Of course, the emotional benefits of estate planning can make a huge difference for you and your family as you look ahead to the future. Without a plan in place, what is already a painful and stressful time for your loved ones can become even worse. Going through the estate planning process means you can rest easier knowing there’s a mechanism for enacting your wishes even when you’re not around to see it happen. At the same time, your family will be able to relax knowing there won’t be so many difficult choices for them to make concerning your assets.
Why Work with a Professional Advisor?
Needless to say, there are a lot of moving parts when it comes to estate planning. Not only will you need to get down into the nuts and bolts of where every dollar will go, but you also have to think about the implications in terms of your taxes and the status of your business. The laws surrounding estate planning are complex and vary from state to state, as well. These are all excellent reasons why you should have an estate planning attorney and an advisor working with you throughout the process.
A professional financial advisor can ensure your strategies are personalized, legally sound, and fully compliant with current tax laws. The CERTIFIED FINANCIAL PLANNER® professionals at Portfolio Advisors offer solid advice that will help put you on the right path so you and your family can approach the road ahead feeling calm and at ease.
Estate planning isn’t just for the ultra-wealthy. Having a comprehensive estate plan is a good idea no matter who you are. Portfolio Advisors works with your estate planning attorney (or can provide referrals) in order to integrate estate planning as part of our other financial services including investment, retirement, and tax planning. Or if you prefer a do-it-yourself approach, you can explore our advanced digital platforms through Wealh.com Our professionals follow the fiduciary standard, meaning we’re always putting your needs first and foremost. To learn more about what we can do, reach out and schedule a meeting with our team today.
Disclosures: This material is for informational purposes only and should not be considered investment advice. Past performance is no guarantee of future results. Investing involves risk, including the potential loss of principal.
