Tags: Financial plan, Investment, Retirement Plan, Estate plan, Trust, Will
The Meaning and Importance of an Estate Plan
Category: financial planning, wills, trusts, estates
What is the meaning of estate planning and why is it important?
Simply put, estate planning includes deciding who will inherit their various assets after they no longer walk this Earth. It is essential to plan for both your retirement and bequests in order to make sure that each of your loved ones; and any causes get exactly what you had intended for them to inherit.
Estate planning is not at all something that only millionaires and billionaires can engage in. Even if you don’t have a number of mega mansions or even property to your name it is still prudent to have a comprehensive estate plan because the absence of one can sow conflict amongst your loved ones. Without a trust, there are probate costs or large lawyers’ fees and costly court battles.
Further, if you do not have a financial plan or estate plan that redistributes your assets the way you wanted to, the court must decide who gets them and this process can be excruciatingly time-consuming and ugly. One would assume that a court would automatically rule that the surviving spouse receives all the assets. However, there have been several cases where this did not happen.
So, in order to have your mind at ease it is crucial to take care of the estate planning aspect of your financial plan. Another immeasurable benefit of a comprehensive estate plan is that it protects your children.
Nobody wants to think about the unthinkable, but if you are a parent of small or any children, then it is essential to safeguard them in any way imaginable. All of this should be laid out in your will. And an even better option is to set up a trust.
In law, a relationship in which assets are held by one party on behalf of and for the benefit of another party is called a trust. A trustee holds assets for the beneficiaries of the trust for a predetermined period and eventually distributes the assets to the beneficiaries.
If you have underaged children and you would like to make sure that they are taken care of in case the unthinkable occurs you may want to set up a trust. Otherwise, even if you have a will, your heirs will have to go through the probate.
Probate is the process supervised by the court which administers your estate and transfers your assets, and it can get rather costly. Your probate lawyer may charge you hundreds an hour on average or thousands in a flat fee. The fees may be even higher depending on the state you reside in and the complexity of your case.
On average the probate cost is an additional 3% of your assets. To keep it simple, on a $100,000 estate with only a will this $3,000 to the courts for probate costs; not including any additional legal representation you may need to understand the meaning of estate planning. You may contact Boracchia Wiviott Wealth Partners for help with services related to trusts, life insurance and more.
You may not care about who inherits your car or your Picasso painting 😉 after you pass away, but ensuring their children’s safety and comfort is important to each and every parent so this section of your financial plan is essential.
Is estate planning tax deductible?
Estate planning fees used to be tax deductible, but unfortunately today vast majority are not. Changes that have occurred recently have made it much harder and in some cases impossible to deduct these fees from your annual taxes.
However it is important to note that even without the tax cuts estate planning brings an enormous benefit to its beneficiaries regardless of any consequences tied to the taxes. The fees that are associated with estate planning can be of different kind. Most common fee is the one a person pays to his or her attorney to draft a document, review it and to update it if necessary.
Before the new tax legislation took effect in 2018 such fees were categorized as “miscellaneous expense” however in the tax reform which was introduced for the tax years 2018 to 2025 these kinds of deductions have been eliminated.
If you are considering who best to draft your estate plan, please feel free to contact us. We will help guide you to the right person for your planning needs. You can call or text Boracchia Wiviott Wealth Partners at (424) 625 – 8943