To some, estate planning may seem like something for individuals in higher tax brackets. The idea may conjure up images from black and white movies of a stuffy lawyer in a mansion’s study, divvying out untold millions to scandalous heirs and devious distant cousins.
But you don’t have to be William Randolph Hearst to prepare a proper estate plan. If you don’t have a suitable estate plan to designate your affairs, you may be causing costly and tremendously lengthy consequences to those you leave behind.
Who Does an Estate Plan Protect?
If there is no plan in place for an estate, the decision for what happens to the assets you leave behind goes to the probate court. Probate is a process that can be dragged out over the years, become increasingly costly, and can possibly leave whichever beneficiary the court dictates to take over the assets in quite a bind.
An estate plan designates an heir or heirs for your assets. Establishing an estate plan protects your beneficiaries, be they your children or next of kin, from accruing costly debts of their own. If you have minor children, ensure they are provided for by instituting a living will and naming a guardian for them as part of your estate plan.
Without a proper estate plan, a court may divide your assets in ways that go severely against your wishes. Your children’s guardianship could be determined by the cold process of the court rather than by what is best for them. You could also leave your beneficiaries a significant tax burden.
How Can an Estate Plan Affect Expenses?
In the event of your passing, your assets are transferred to your beneficiaries. But you may not realize there is a cost to those transfers. Courts have clerks and other staff members whose paychecks come from the taxes and fees levied during these procedures because they are filling out and filing all the necessary paperwork. If your estate plan is unclear, more hands need to touch the documents, and the courts need to be paid more. While this is an oversimplification, it gets the point across.
A proper estate plan protects you and your heirs from the IRS. On top of federal and state estate taxes, there are also state-by-state inheritance taxes that your heirs will be expected to pay on their inheritance. When planning your estate, make sure you speak with an attorney who can show you ways to decrease the income tax for which your beneficiaries will be responsible.
What Else Can I Do With My Estate Plan?
There are plenty of situations where someone may not have a specified person they want to be the beneficiary to their estate or assets upon their passing. You can still set up your estate to ensure your money goes to causes that you approve:
- If you are passionate about a local cause, a proper estate plan can donate your assets to support it.
- If you have stock in a business or are a business owner, you can use your estate plan to name a successor to take over the company and outline future business plans.
- Creating an estate plan can allow you to plan for your care if you are incapacitated mentally or physically. You can designate what decisions you want to be made or who you wish to make those decisions for you.
However you wish to handle your assets in the event of your death, call and schedule a consultation about how to put an estate plan in place for yourself today: (805) 244-5291.