Let's be honest about this. Planning a vacation, a wedding, or a birthday party is fun. But when the conversation turns to estate planning, the excitement usually leaves the room immediately.
It makes sense because no one wants to think about their own passing. Since your estate roadmap doesn't kick in until you're gone, it's easy to push it to the bottom of the to-do list. However, tackling this now is one of the most loving things you can do to help ensure your affairs are settled with ease.
Safeguarding your loved ones
Many people assume estate planning is only for the ultra-wealthy, but that isn't the case. Most people need a roadmap in place to help their heirs avoid a process that is often long, burdensome, and expensive.
Certain accounts with named beneficiaries, like life insurance, are great because they bypass the lengthy court process known as probate. However, other assets like your house, individual bank and brokerage accounts, cars, furniture, and artwork can be probated.
If you don't have an estate roadmap, the courts decide who gets these assets. This takes time and money. In fact, probate can last anywhere between nine months to several years. During this time, the estate's assets are frozen. The longer your assets are stuck in probate, the more it costs. The average cost of probate is 3-7% or more of an estate's total value.
Protecting your children
If you have young children, you have to ask the tough question. Who will care for them if you pass away? A will is the tool that handles this crucial part of the process.
To help ensure your kids are looked after exactly the way you want, you should consider naming their guardians in case you and your partner unexpectedly pass away. Without named guardians, it's up to the courts to decide who cares for your children. That is a decision best left in your hands, not a judge's.
Lowering your tax burden
Another major reason to build this roadmap is to protect your heirs from unnecessary taxes.
Even a modest amount of planning can significantly reduce, or even eliminate, federal and state estate taxes, as well as state inheritance taxes. Additionally, there are strategies available to minimize the income tax burden on your beneficiaries. Failing to have a strategy in place could result in a substantial financial liability for your heirs to the IRS.
Facet is not an attorney and does not provide tax or legal advice. Consult a qualified tax or legal professional regarding your specific situation.
Avoiding family conflict
Money has a way of tearing apart even the most tightly-knit families. However, many family feuds would never happen in the first place if an estate roadmap was established.
A revocable living trust is one common tool people use to designate who takes charge of their assets if they become unable to or pass away. This helps your family avoid unnecessary unrest and helps ensure your assets are treated the way you wish.
It also assists you in creating customized arrangements if needed. For instance, you can make arrangements for a child with special needs or establish a trust for someone who may benefit more from receiving scheduled payments rather than a lump sum.
Moreover, it enables you to allocate resources more appropriately. You might give greater support to the child who provided the majority of care in your later years, or you might allocate less to the one whose extensive education you funded while contributing comparatively less for their siblings. This promotes fairness and a thoughtful distribution of resources.
The Facet difference
At Facet, we believe your financial life is about more than just numbers. It's about your values and the people you love. That's why we don't just hand you a static document and walk away. You'll work with a team of CFP® professionals to build a dynamic financial roadmap that evolves as your life changes.
Our membership model charges a flat fee, meaning our advice is objective and focused on your financial wellness. Whether you're planning for your family's future or utilizing our partnership with wealth.com to set up a trust (additional fees apply), we're here to guide you with calm confidence every step of the way.
