Meaning & Importance of Estate Planning

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You spend your life working hard to give a better future to your loved ones. From building a home for your family to saving money for children’s higher education, you do everything you could to provide a good life and safe future to your loved ones. However, when planning everything, some people forget to think about the inevitable- death! No matter how hard it is, you need to think about death. What will happen to your hard-earned money and assets when you pass away? Don’t you want to control how your assets and wealth are distributed to the people or organizations you care most about? If you’re serious about protecting your assets and the people you love, it’s important to think about estate planning. You might have a misconception that estate planning is for ultra-wealthy families and you’re not wealthy enough to have an estate plan. But the truth is if you own a house, car, savings account, and some investments, then you also need an estate plan. To clear all your doubts, let’s take a look at the meaning and importance of estate planning.

 

Meaning of Estate Planning

Estate planning is a type of financial planning that involves managing an individual’s assets and ensuring proper distribution in the event of their incapacitation or death. This type of planning includes the transfer of an individual’s assets to heirs and beneficiaries, as well as the settlement of estate taxes. Estate planning is a specialized service offered by a qualified estate planning attorney. Only a lawyer experienced in estate law can create a solid estate plan that includes a set of legal documents.

An estate plan documents everything you own, such as your home and other real estate, vehicles, bank accounts, investments, life insurance, fine jewelry, precious paintings, furniture, and other personal possessions of value. Estate planning allows you to decide how those things are distributed among the people or organizations you care about. You may now think that this is the same as writing a Will. However, estate planning is more comprehensive than creating a Will. Unlike a Will that comes into effect upon your death, an estate plan is valid even when you’re alive. It allows you to have a say in how your financial matters and medical affairs are handled in case you ever become incapacitated. Without an estate plan, state law and probate courts decide on your behalf after you’re gone. And the court’s decision might not reflect your desires or suit your family’s needs.

Benefits of Estate Planning

Estate planning is for everyone- from high net worth individuals to middle-class families. This is because you don’t have to be super-rich to buy a house, car, or invest in the stock market. Anyone with a decent salary or flourishing business can have multiple assets that they pass to their heirs. Estate planning is simply determining who receives the property when you pass away or how your financial matters are handled if you become incapacitated. In addition to this, estate planning also provides other benefits such as:

  • Protect Your Children
  • Reduce Tax Burden
  • Prevent Family Feud
  • Hassle-Free Probate
  • Plan for Incapacity
  • Support Your Favorite Cause
  • And More!

As a responsible parent, you need to think about the unfortunate situations. In the worst-case scenario, what will happen to your minor kids if both parents die? For situations like this, you need to name the guardian for your kids until they turn 18. Without naming the guardian of your child in the estate plan, the court gets the authority to decide who will raise your children. Estate planning also protects your heirs during the probate process and helps in reducing their tax burden for them. Moreover, an estate plan goes beyond a Will as it also includes Durable Powers Of Attorney to make financial decisions if you are unable to make decisions yourself. It also consists of medical directives to determine the medical treatment you want if you become incapacitated. Estate planning helps in avoiding all the confusion and dispute after your death or incapacitation. You can also choose to support your favorite cause. It gives you the authority to leave a portion of your assets for a charity instead of family.