What is Estate Planning?
Estate planning is the accumulation, the preservation, and the distribution of your assets. It is accomplishing your personal family goals and easing the management of your estate, as well as minimizing taxes.
Most of us spend a considerable amount of time and energy in our lives accumulating wealth. With this, there comes a time to preserve wealth both for enjoyment and future generations. A solid, effective estate plan ensures that your hard-earned wealth will remain intact as it passes to your beneficiaries, rather than being siphoned off to government processes.
Ben Franklin once said, "In this world, nothing is certain but death and taxes." A major goal of estate planning is to minimize the effects of both of these inevitable phenomena on your assets. You can achieve this by consulting a financial professional and creating an estate plan with clearly defined objectives.
Common Estate Planning Myths:
There are many inaccurate myths about estate planning and if you believe some of them, they could cause considerable hardship to you and your family. Although you may not like to think about the end of your life, proper planning is an act of compassion toward your loved ones. Here are a few myths and misconceptions:
1. We Have Plenty of Time - The notion that estate planning can wait indefinitely is quite dangerous. Even though we all expect to live to a ripe old age, we never really know when we will die or become incapacitated. Every day of procrastination is a gamble. The only way to ensure that your final affairs will be handled properly is to do your planning now.
2. Estate Planning is Expensive - Some people avoid meeting with a lawyer because they fear high fees. In fact, the legal fees for the essential planning documents you need are surprisingly reasonable. The fees are a small price to pay when compared to the potentially high costs of leaving an unplanned estate.
3. I Can Do It Myself - This may seem like a good way to save some money, but writing your own will can create some serious problems. When you write your own will, you are depriving yourself of the expertise and skill of a professional estate planner, who is trained to analyze your own unique situation and then plan for any potential problems.
4. Estate Planning is for the Wealthy - Everyone needs basic estate planning, not just the wealthy. The important goals of preserving your family's security, fairly distributing your assets, arranging charitable gifts, and planning for your possible incapacity apply to everyone, regardless of their wealth. In fact, you may need estate planning even more than the wealthy, who are better able to afford the high cost of poor planning.
5. Our Children Will Share - This misconception has caused a lot of unintended grief and hardship. The idea that you can leave everything to one child, who will then fairly distribute the inheritance to your other children, often fails in practice. In many cases, the children receiving the inheritance have not fairly shared it with their brothers and sisters. Even when they try to do the right thing, innocent misunderstandings can lead to severe family discord. Your children may also sustain unnecessary tax burdens when redistributing inherited assets. This is a potentially explosive problem to leave for your loved ones.
6. Joint Ownership is Better Than a Will - Some people try to avoid estate planning by naming a son or daughter as the joint owner with right of survivorship for their home, their bank accounts, and their investment accounts. Without guidance from a skilled attorney, this plan can backfire and cause you to lose those assets while you still need them. It can also cause unintended tax problems for both you and your child.
7. It's Not My Problem - The worst approach is to simply ignore the need for estate planning with the excuse that "someone else will have to deal with it." This imposes an enormous burden on your surviving family members, forcing them to deal with your unplanned financial and legal matters during their time of mourning. This can be easily avoided with some simple and inexpensive planning.