Planning for the future never goes in vain, whether you are there or not. Have you ever thought about what will happen to your belongings and your kids when you are gone? An estate plan is about that. It decides to whom your assets will be transferred when you pass away. It also lays out a plan for handling your business if you aren’t able to do this by yourself.
What is an estate? It is a collection of what you own – from property to money and other belongings. No matter what or how much you have today, all those things have to be inherited by someone when you aren’t around. And, that’s exactly where you need estate planning.
Who needs to have an estate plan?
Many people think that the need for an estate plan is only for rich people but is it? It applies to everyone. If you have people depending on you, and have anything of value, it’s good to have a proper plan.
More importantly, an estate plan also works if you become incapacitated. Now you know, no matter how much money you have, having an estate plan is good.
What is meant by state planning?
An estate plan is a folder of legal documents that have your expectations laid out in the following situations:
- The fate of your assets if you die
- What happens if you are not in the position to take care of yourself and your estate
An estate comprises everything such as cash, real estate, investments, and business interests. A plan helps in deciding who gets what part of your estate.
The plan also describes what you want your caretakers and loved ones to do if left incapacitated. It covers long-term care and healthcare, managing finances, and the caretaking needs of your children if that’s the case.
If you aren’t sure how, when, or why you can be incapacitated. There is a report saying that people older than 65 years do have some kind of disability, affecting their everyday lives. So, it’s always better to be prepared.
Busting myths related to estate planning
There is a cloud of myths around estate planning. Let’s bust all of them one by one.
Myth 1: You don’t need an estate plan when you are young
Even someone of age around 30 has debts, bank accounts, retirement account, and personal property. All of these needs to be transferred to someone in case of an accident. It is a frightening thought to think about your own death, but it becomes a lot easier for your loved ones if you have got it all planned.
Myth 2: You don’t need an estate plan if your spouse does everything
It doesn’t matter if you are married, each one of you should have a plan. There may arise situations like if you die right after your spouse, and neither of you has had a plan. Things can get a little out of hand here.
Having a plan reduces the decisions that need to be made by your loved ones when they are grieving.
Myth 3: Your family knows the right thing
No, it’s nothing like that. Without a legal document, your friends and family might not be sure of what to do. Small things can also lead to disagreements.
Myth 4: You are done after creating a plan
After you create an estate plan, you need to make necessary changes as your life goes on. You might want to check the beneficiaries and all your documents.
Will and estate planning: Are they the same terms?
One question that might be popping in your mind is, “what is the difference between a will and estate planning?” aren’t they the same thing. To answer your question, they have their differences.
A will decides the fate of your estate after your death means who gets what share of it. You can also appoint someone, a close friend or family member, as an executor whose job is to ensure that all your wishes in the will are followed through. That’s it.
However, estate planning is a broader term of which will is a small part. It helps to protect your wishes no matter you are alive or dead. The documents in estate planning cover everything from your finances and healthcare to end-to-end wishes.
The average cost of an estate plan
What is an average cost of an estate plan? You may ask. Well, it depends. Everyone requires a different estate plan suitable for their needs and situations.
The costs of estate planning vary according to the documents required and how complex they are. For example, a small and young family with a small average income might do well with a simple estate plan. The area of focus here is only the guardianship of the children and a will. On the other hand, a rich business person with a big family and vast property may require an estate plan with many complex documents.
In both scenarios, the cost is estimated differently.
The fees used by attorneys also vary, and how you pay can affect your estate planning costs. The main rate structures include the following:
- Flat fees
- The billable hour
- Contingency fees
So how much cost does it exactly involves, this question doesn’t have a straightforward answer. It depends on the hired lawyer, the chosen estate plan, and also your location.
Estate planning for a high-net-worth individual
If you are a high-net-worth individual, estate planning can be a bit challenging. Even with the help and guidance of an expert team and specialists, you might be surprised to know how much can be lost to taxes. Estate tax mitigation is vital for your estate planning. Here are some estate planning strategies for high net worth individuals that are tax-efficient:
- Save through gifting
- Split the family income among the members
- Charitable giving
- Life insurance
- Develop a family limited partnership
Another aim of estate planning is to save your asset for the future, and it can be done by following the strategies mentioned below:
- The right plan for business succession
- Pass on vacation property
- Consolidate assets
- Instill financial responsibility in your coming generations
Now that you know how important estate planning is, you better strategize one suitable to your interests.