It’s not surprising that younger adults tend to put estate planning on the back burner. However, even if you don’t have children or many assets yet, you can benefit from going through the process now.
Every stage of life can benefit from Estate Planning and here are a few reasons why:
1. To Plan for Your Own Needs An important step in the estate planning process is determining who will make decisions on your behalf if you’re unable to do so. If you become incapacitated—or unreachable due to travel or other circumstances – naming a durable power of attorney and health surrogate to act on your behalf on financial, legal and health matters can help ensure that these decisions are made in your best interest.
2. To Choose How You Dispose of Your Wealth The most basic document estate planning document is a will, which names a personal representative who is responsible for the administration of your estate after you die and distributes property as you direct. If you have minor children, you can name guardians to oversee their care in your will.
If you want to avoid the extended probate process a living or revocable trust will hold assets for your benefit while you’re alive and name the people you wish to receive your property when you die, as well as a successor trustee to administer your estate. Properly funded, a living trust can avoid probate altogether.
3. To Minimize Transfer Taxes Maximizing the wealth you transfer to your beneficiaries (and minimizing transfer taxes) can be an important component of the estate planning process. The Tax Cuts and Jobs Act of 2017 has many advantages, including an increased exemption amount until 2026 and portability, which means spouses can share one another’s exemption. You can make annual tax-free gifts up to $15,000 in 2019 (and double this amount for married couples). Additionally, you can pay medical and educational expenses for someone else without incurring the gift tax.
4. To Incorporate Philanthropic Planning If you have philanthropic goals—Going through the planning process allows you to choose a charitable cause that’s important to you, select the assets you wish to give and determine the best way to make your gift.
5. To Protect Family Wealth Many wealth transfer strategies also have wealth protection benefits, which can be an important consideration for affluent families. Asset ownership, insurance, limited liability entities, irrevocable trusts and asset protection trusts are all methods designed to protect your assets from creditors in the event of frivolous law suits and claims.
6. To Prepare Future Generations to Receive Wealth Finally, preparing the rising generation to receive wealth can be very helpful in preserving family wealth in the long term. Developing an estate plan is often a good opportunity to establish wealth planning goals, facilitate conversations about what wealth means to your family, and educate adult children about financial concepts and ways they can become involved in creating and sustaining the family legacy.
While you may think that only the ultra-wealthy need an estate plan, anyone—regardless of age, marital status or net worth—can benefit from having a plan in place if the unexpected happens. If you’re unsure where to begin, contact Sarah Geltz, Esq. for a complimentary consultation with the Kendrick Law Group to help you develop a sound estate plan that protects you and your heirs.