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When you hear the word “estate,” you might think of mansions, huge stock portfolios, art and antiques, and other pricey possessions like cars, yachts, and fine jewelry. The things high-net-worth individuals, especially elderly ones, own and leave behind them after they die.
But estate planning isn’t just for the ultra-wealthy or the very old. Everyone, regardless of financial status or age, can benefit from having an estate plan — assuming you have assets to leave and people to leave them to.
What is estate planning?
Your estate is essentially everything you own, including your home or other property, car, bank accounts, investments, life insurance, furniture, and personal possessions.
An estate plan gives you a say in how those things are given to the people or organizations you care about. It arranges your affairs and leaves a written record of your wishes and intentions. It indicates how you want your property, belongings, cash, and financial assets distributed.
If you don’t make these decisions and designations while you’re alive and able, state law and probate courts will make them for you after you’re gone. And the results might not reflect your desires or suit your family’s needs.
Here are five major reasons why estate planning is important, and how it benefits you and your survivors.
1. Estate planning goes beyond a will
Many people think of a will and an estate plan as the same thing. They’re not.
Both will and estate plans provide instructions for how your goods and assets should be handled after your death, but estate planning encompasses much more. It can also include:
Durable powers of attorney to appoint individuals to make medical and/or financial decisions on your behalf you’re unable to provide instructions yourself
Medical directives to outline the kinds of medical treatment you want (or don’t want) if you become incapacitated
Beneficiary designations to explain who should receive money from life insurance policies, annuities, retirement accounts, and other financial accounts
One or more trusts to facilitate passing property to your heirs and potentially provide tax benefits for both you and your beneficiaries
2. Estate planning saves time and money
When you die without a will, this means you have died “intestate,” and the laws of the state where you live and own property determines what happens to your assets and who gives them away. The probate court will name a representative to distribute your assets. In many cases, the surviving spouse gets the job. If you don’t have a surviving spouse and no other close family member is willing or able to do the job, the court will name a public trustee to distribute your assets according to state law.
While all of this is going on, no one can touch your assets or carry out your directives. They’re frozen until the court system combs through every detail of your estate, applies state laws, pays off debts, and makes decisions about how to allocate your assets.
The probate process involves paperwork and court appearances by lawyers, and the estate pays their fees. It can be time-consuming, taking months and even years, …read more
Source:: Business Insider