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Giving thought to your future financial plans can be one of the best things you do for yourself and your loved ones. Certainly, the subject matter is solemn. But the fact is that you could potentially gain significant benefits — both financial and emotional — through family estate planning. It doesn't necessarily need to be complicated. Small steps can make a big difference.
These estate planning basics provide insight into the advantages of taking action.
What to Know About Family Estate Planning
A well-designed estate plan may help save you a substantial amount of money. As a result, more could go to support loved ones or your favorite charities.
For example, giving forethought to your estate plan and arranging assets appropriately can help your beneficiaries avoid a lengthy probate process after your death. That process can be expensive, potentially requiring attorneys and fees, depending on your state.
Also, planning might help to reduce estate taxes. Even families with a modest amount of wealth can seek to better manage taxes by planning ahead and avoiding common mistakes.
Beneficiary Planning Can Help Manage Mixed Families
Estate planning can also be invaluable when families get complicated due to death, divorce or when offspring from previous marriages are in the picture. Even when all concerned are on good terms, legal structures and state laws might cause unintended consequences.
For instance, depending on how events unfold, you might inadvertently disinherit children from a previous relationship if you die before your current spouse. As a result of beneficiary designations, one branch of the family could end up with nothing. That might put everyone in an unpleasant situation, whether they end up feeling awkward or they're struggling financially. However, a well-thought-out estate plan might anticipate some complications and help head off problems.
5 Benefits Associated With Family Estate Planning
Giving thought to who your money will be left to — and how — can help to provide peace of mind not only for you but also your loved ones. Here are five other possible advantages to consider.
1. Difficult Situations Can Be Easier to Navigate
Estate planning isn't just about death. If you're incapacitated due to an accident or illness, good estate planning is critical. For example, you can name a power of attorney who will be given the ability to manage your affairs if you're ever unable to. That person can pay your bills and complete essential tasks, reducing the financial impact and cleanup required after a major life event.
Your loved ones might also want guidance on difficult end-of-life decisions. Through family estate planning, you can tell them what treatments you're interested in pursuing — or when you might want to stop treatment — which can potentially help provide them greater certainty when making difficult decisions.
2. You Can Ensure Loved Ones Will Be Provided For
People often think of life insurance when they imagine family estate planning. That's an important consideration for any plan. Insurance can provide a substantial amount of money for dependents, helping avoid financial hardship that might accompany the death of a provider.
A tragic death is always difficult. What's worse is if survivors then must move out of their home or give up on goals and dreams such as getting an education. Insurance can also create a legacy that may help better lives for generations.
3. Your Plans Can Help Those With Special Needs
If you support somebody with special needs, they may need ongoing support after your death. While inheriting money is often helpful, it can be problematic if an inheritance causes the loss of critical state and federal benefits. Fortunately, there are ways to pass assets on to loved ones with special needs while helping them stay eligible for the benefits they need. A financial professional who specializes in this sort of planning can assist.
4. Charities & Your Favorite Causes Can Receive Support
If you're charitably minded, estate planning might help you support the causes that matter most to you. While you can certainly name charities to receive assets after your death, it might be rewarding to give assets away during life as well.
In addition to helping the cause sooner and gaining a sense of satisfaction, you might enjoy some financial benefits. For example, an estate planning attorney might be able to craft a plan that provides lifetime income for you and a spouse (so you can afford to give assets away) while also offering tax deductions.
5. You Can Help Create Generational Wealth
If you're passing assets on to future generations, it's wise to take steps to protect that legacy. A large inheritance can be problematic for beneficiaries who lack financial expertise. Plus, you can't anticipate all the risks and surprises that future generations might face.
Vehicles such as trusts might be able to preserve assets, protecting your beneficiaries from themselves and others. For example, you might establish rules that allow payouts only after reaching certain milestones (like education levels or certain ages) or limit how much creditors and ex-spouses can access from family funds.
Exploring Your Options
Now that you know some estate planning basics, you're ready to begin evaluating strategies — and implementing the ideas that make sense. An attorney should always help with estate planning needs, as they can provide detailed guidance and legal documents. It's also crucial to enlist a CPA for tax questions and a financial professional for big-picture strategy and implementation ideas.
If you're interested in creating a plan, don't hesitate to start the conversation today. That way, you can be more confident that you and your loved ones are taking wise steps to help save money and make life easier for all.
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