Top 5 Reasons to Start Estate Planning Early
Although some people may believe that estate planning is only for the elderly or the well-off, the truth is that planning your estate should be considered as important as having insurance. Protecting anything or anyone you consider valuable, including your home, car, savings and even members of your family can give you the peace of mind enjoyed by those who have prepared for the uncertainty of the future.
The fact is, it’s never too early to start planning for the days, months and years ahead and you do not need to be wealthy. It’s not about net worth or assets; it is about protecting yourself and your loved ones in case of a tragedy.
An estate plan is as individual as the person building it. The chances are good that you need one and should begin yours immediately.
The term “estate planning” actually involves many things, like documents such as a will and a living trust. By definition, it "plans" what to do with your assets, or "estate” at death or incapacitation and uses a combination of these documents to execute your wishes.
Typical documents that are the foundation of most estate plans
- A will Will declares how you want your assets distributed after death, and names guardians for your children who are minors. It designates an executor who will carry out the distribution of your assets and pay your final bills. Assets passed via a will must go through probate, meaning that your estate must report all income, expenses, and assets through the court, on the public record.
- A Durable Power of Attorney appoints someone who can make financial decisions for you if you become incapacitated; this may include writing checks, paying bills, or signing up for disability.
- A Living Trust or a living revocable trust, details how you want your assets distributed upon your death and appoints a trustee who is responsible for distributing all assets passed through the trust. The most significant differences between a will and a trust are that trust assets do not have to go through probate, and that a trust goes into effect immediately upon signing. Many times, a living trust may be worded and written to substitute a power of attorney.
- An Advance Directive specifies who can make health care decisions for you if you are unable to make them yourself. It also allows you to express your wishes if you are in an end-of-life situation such as a persistent vegetative state or coma.
Nearly 60% of American adults have yet to begin estate planning, leaving countless others at risk. Keep reading to learn a little more about why you should start estate planning today, no matter your age or financial situation.
1. You can die or become incapacitated at any age
It’s unpleasant to think about, but tragedies can happen without warning. Even if you are young and healthy, you are not immune to misfortune leaving you unable to make arrangements to ensure your family’s security. Having an estate plan in place protects your loved ones.
In the event of incapacitation, a living trust designates someone to manage your affairs if you cannot. Your hand-picked trustee will be able to help you immediately. They may handle your expenses, help you apply for disability, and make crucial medical decisions, without time-consuming court intervention.
2. Setting up an estate plan early means less work later on
An estate plan is made up of living documents that change with you as you move through life’s stages.
When you start estate planning early, you are setting up a foundation that can be adjusted as you experience significant life changes, such as marriage, divorce, or becoming a parent or legal guardian.
Also, an estate plan will ease the burden of your trustee family member or friend who will act as your estate administrator. Documents like wills, living trusts and powers of attorney give your executor estate administrator clear instructions.
3. Peace of mind
Knowing that, despite the often-frightening unpredictability of life, at least your wishes will go to plan after your passing is invaluable. You’ll be able to take care of your family even when you are no longer there.
The living trust segment of your estate plan ensures that your values will be honored if you become incapacitated. It helps you maintain agency over your affairs when you would otherwise be at the mercy of your loved one’s best guess. While they would undoubtedly mean well, no one knows your exact wishes as well as you do.
4. Avoid probate
There are countless horror stories about bereaved loved ones dealing with probate. An estate plan can help your loved ones avoid the treacherous process through the court system.
Having an estate plan in place will also reduce the amount of applicable estate taxes your loved ones will have to pay, which can be expensive and drastically reduce what you leave behind.
You don’t want the state to decide what happens to your assets. Leaving it to the state to settle your affairs is a time-consuming process that will only extend the heartbreak of your loved ones. You can help your loved ones avoid the fees and delays associated with the probate process with a carefully crafted estate plan.
5. Protect your children
If you are a parent, tackling an estate plan should be at the top of your to-do list. The will portion of your estate plan allows you to name guardians for your children until they are of legal age, as well as a trustee to handle the financial aspects of raising them. Without a will, the state will step in and decide who will care for your children, and who will receive funds from your estate on their behalf.
Creating an estate plan is a strikingly thoughtful thing you can do for your loved ones. Put simply; an estate plan is one of the most potent collections of documents available to individuals. The sky is the limit when it comes to building your estate plan.
Sometimes, when people attempt to do their estate planning on their own, they mistakenly believe that a will is enough.
Don’t build your estate plan yourself. Contact one of our attorneys Paul Yee today.
If you live in the South Pasadena, Pasadena, or Arcadia, Alhambra, Pasadena, or South Pasadena areas and would like to know more about planning your estate, visit our website at www.paulyeelaw.com and contact us to see how to get started on this vital process.