Estate planning is not just for the elite. If you have savings, real estate, or run a small business that you plan to leave to your family members, an estate plan is necessary. If you’re unsure if having one is right for you, take a deep dive into some of the benefits of estate planning in Worthington, OH, below.
7 Benefits of Having an Estate Plan
Despite everything we overcame in 2020, two out of every three individuals still don’t have crucial estate planning documents. Without an estate plan, you can’t be sure that your loved ones will inherit your assets aligned with your wishes. Creating the right plan for your investments, children, business, or health care is among the many aspects you can include in your estate plan. But why is it so important?
1. Protects you and your beneficiaries
A large part of estate planning is making sure all of your documents are in order if you pass or become incapacitated. Taking the time to put together beneficiary designations and asset protection protocols will help to protect your family members once that time arrives. If you don’t have a good estate plan, the court will make all of the essential decisions regarding your assets and care. These probate court hearings can take years and rack up court fees that will fall into the hands of your loved ones.
2. Limits tax liability
The wealth you have accumulated can and will be taxed, but you can implement a wealth transfer strategy within your estate plan to limit the amount of taxes owed once an estate gets passed to a beneficiary. Tax laws to consider when drafting your estate plan are estate taxes, inheritance taxes, and generation-skipping transfer, among others.
There are a few common types of trusts you can use to protect your assets from tax liability. These include living trusts, special needs trusts, irrevocable trusts, revocable trusts, but the list goes on. It would be best if you worked with an attorney or tax advisor to devise a tax reduction strategy that best suits you.
Another step you can take to minimize the taxes owed on your assets is opening a Roth IRA to transfer money to your loved ones. A Roth IRA is an individual retirement account, alternative to a 401(k), that allows withdrawals without taxation because the dollars deposited have already been taxed.
3. Saves family members from having to make the difficult decisions
Without a documented estate plan, your loved ones will bear the burden of making all financial and healthcare decisions. Outlining a plan for your care in the event you are hospitalized will give your family members peace of mind and the capacity to spend more time caring for you and each other. There will be no room for quarrel over powers of attorney or distribution of assets if you pass on.
Have you thought about your funeral arrangements? Use an estate plan to explain in detail what you want your family to do after you pass, so they won’t have to make those decisions alone.
4. Protects your minor children
It is not just individuals nearing retirement or in old age who should be undergoing estate planning. Dying young is not something you see coming, but that shouldn’t stop you from preparing for it. Deciding who will have custody of your minor children if you pass on without a surviving spouse or become incapable of providing care for them is vital to ensure your children are in good hands. Without a legal document outlining your wishes for their care, the courts will step in and make the decision themselves.
5. Helps you prepare for retirement
A well-prepared estate plan can not only benefit your family after you’re gone but can benefit you as you transition into retirement. After verifying you will have enough money to provide for yourself in retirement, consider what insurance policies you may need if you can no longer take care of yourself. Your estate plan can include ensuring you are eligible for government benefits like Medicare or designating a power of attorney or health care proxy.
6. Allocates money to your favorite charity
If you would like to use your assets to make philanthropic contributions to the causes important to you, include this in your estate plan. You can set up a family foundation or charitable trust or designate an amount of money to be donated after you pass.
7. Makes sure your business is in good hands
It is crucial to outline your desires for succession in your estate plan if you own a business. Do you want to keep it in the family? Who will take over running the day-to-day operations? If there is debt involved, who will be responsible for it?
Estate planning is important for everyone at every age, but it is not a task you can go at alone. Communicate your intentions with family and trusted friends, then enlist the help of financial advisors, estate planning attorneys, and accountants to help you draft the necessary documents. They will ask all of the right questions and help you to avoid any mistakes. To learn about estate planning in Worthington, OH, contact a trusted financial advisor at Royal Oak Financial Group today!