For many, death is the scariest part of life followed, in close second, by paperwork. It’s hardly a surprise, then, that less than half of US adults have an estate plan—the set of documents which organize your affairs in preparation for your eventual death. After all, if facing mortality is number one and filing paperwork number two on life’s list of worst experiences, then the combination must be H-E-L-L, itself.
This misconception deserves dissecting because, despite popular sentiment, estate planning is an act of kindness (and not nearly as torturous as it may seem).
Asset Organization is an Exercise in Generosity
Nobody plans their estate for their own benefit, unless, of course, you include advance directives such as medical and financial power of attorney in your definition of “estate” (which you should). Rather, in general, people organize their assets to ensure their beneficent wishes are carried out in the most cost-effective, efficient way possible. Put simply, your estate plan is the architecture of your greatest gift: the passing on of your life’s work.
Readers might roll their eyes, thinking that sounds a little grandiose, but consider the incredible hassle of managing inherited assets sans plan and I promise that’ll change. A properly-drafted estate plan achieves the following:
1. Helps you avoid probate
Such mechanisms as beneficiary designations and trust agreements help you steer clear of court intervention in managing a loved-one’s post-mortem affairs. A list of probate’s potential complications would fill this page and many more. Suffice it to say that you save yourself up to years of paperwork and lawyer meetings by being proactive and filing little bit of paperwork now.
2. Provides tax benefits
It’s not only headaches that an estate plan saves you, it’s also cash. Take, for instance, the simple case of you gifting a child a property by putting it in their name. When you die and the child eventually sells, they’ll need to pay taxes on the appreciation gained by the property between the time is was gifted and sold. Had they instead inherited the property at the time of death and sold shortly thereafter, all those tax dollars would stay in their pocket.
3. Protects family finances
The living trust is an essential estate planning document that allows you to pass assets on to family members according to pre-arranged conditions. This might mean installments paid out to young beneficiaries until they reach age of maturity. It might also mean, protecting loved ones from their own bad habits by conditioning payments based on certain behaviors. What’s more, such trusts help you skip probate by taking advantage of statutes approved by the IRS.
Of course, this is not an exhaustive explanation of all an estate plan can do but should serve as an example of the many ways a little bit of forward thinking now can save a lot of anxiety down the road. And after all, that is essentially what estate planning is all about: shielding loved ones from stress by ensuring your continued care even after you’re gone. What could be kinder than that?