You might think of estate planning as something for only the wealthiest Americans. The truth is, though, estate planning is an important process for anyone who has accumulated assets, not just the ultra-wealthy. It’s a common assumption that estate planning only regards estate taxes, but in reality, this isn’t the case.
Think of estate planning as legacy planning. It’s about building and protecting your legacy for your loved ones after you pass away.
Every plan should have a goal, and estate planning is no exception. What should be the goals of your estate plan? It depends on your unique needs. However, there are some objectives that are common in many estate plans. Below are a few goals to consider:
Provide stability for your loved ones.
One of the most powerful legacies you can leave is the gift of financial stability for your spouse, children, grandchildren or other loved ones after you’re gone. The core of your legacy plan will be deciding how to best provide that stability.
First you’ll want to consider which assets you’ll give to whom. Then, think about how those assets should be distributed and which tools you might potentially use.
For example, do you want to use a trust to minimize probate and exercise control over asset distribution? Can you use life insurance or other financial tools to maximize the amount you leave behind? Awareness of the potential options available can help guide you to the right decisions.
A good approach might be to create a vision of how you want to provide for your loved ones and then develop a plan to turn that vision into reality.
Take steps to neutralize financial threats.
Another key objective of any estate plan is to minimize financial risks that may threaten your legacy. Even if you won’t face estate taxes, there are other potential threats that can drain your estate.
Probate is one such risk to take into consideration, as it can delay asset distribution and generate sizable administrative fees. Tools such as trusts, life insurance, annuities and more can be used to minimize the threat of probate.
You may also want to consider the potential for debt that end-of-life medical treatment and long-term care can create. These expenses can be significant, and your family may be forced to pay those bills out of your estate. Long-term care insurance and supplemental Medicare coverage can help protect against this risk.
Additionally, if you have a 401(k) or an IRA, taxes could be an issue for your beneficiaries. You may want to make sure they understand their options to spread out the tax bill over several years.
Prepare for the event of your incapacitation.
What happens after you pass away shouldn’t be the only aspect of a legacy plan. It’s also important to address your wishes for potential end-of-life issues that can arise. This can be helpful in the event you become unable to make or communicate decisions.
Incapacitation is often caused by diseases of cognitive degeneration, like Alzheimer’s or Parkinson’s, but it can also arise unexpectedly because of a variety of causes. Without proper planning, your family members may end up having to make financial and medical decisions on your behalf that you wouldn’t have made for yourself.
Creating documents such as a living trust, living will or power of attorney can serve as part of your legacy plan and may help minimize the financial impact of incapacitation.
A financial professional can help you decide which tools you need to achieve your estate planning objectives. Call us at Gregory Financial Group and speak with one today to begin building your legacy.
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