It is never too early to begin your estate planning process. We have all heard the phrase, “you can’t take it with you.” While true, it brings about the question of what to do with your assets now. This is where effective estate planning comes into play. The process by which you create a financial plan, which will provide for your family after your death, is known as estate planning. The majority of estate planning focuses on minimizing taxation on your estate, leaving as much as possible for your family and as little as possible to the government via estate taxes.
There shouldn’t be a reason to delay your estate planning. Timing is one of the key points to success; you should begin estate planning as soon as you begin to acquire assets. The failure to plan ahead can have significant adverse consequences. One troubling possibility is that a court (and not you) might decide who inherits your assets. A second crucial fact is that without proper estate planning, half of your estate could be paid to the government in taxes, rather than going to you loved ones. In many cases, families have been forced to sell assets, often at a discount, in order to meet estate tax obligations. Proper estate planning, ahead of time, can prevent these catastrophes.
Creating a will is an important part of planning your estate. Many people do not create a will because they feel they do not have enough assets. This is one of the most common errors in estate planning. Just about anyone who has any type of asset should have a will.
In addition to a will, a family trust is also important to a complete estate plan, because it preserves significant credits against your estate tax liability, and also avoids probate. Probate is the process where a court distributes your assets, which is open to public scrutiny, long and expensive. A proper trust avoids probate and reduces estate taxes.
Estate planning works very much like other forms of financial planning. It involves the preparation of a comprehensive, coordinated plan that ties together all the various aspects of your financial situation. It involves a complete inventory of your assets, including not only your real and personal property, but also your insurance policies, retirement funds, annuities and any other source of income. The plan includes the selection of beneficiaries. The beneficiaries are the people who will receive your assets after your death. Ideally, you want your family to inherit--not the government. It is true that “you can’t take it with you,” but you should have the final say about where it does go.
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