Estate planning is an often overlooked topic during the financial planning process. Discussing estate planning with others can be uncomfortable and easily avoided, yet this is an important part of financial planning. Every adult with at least a modest net worth or who is in the process of building one should have a solid estate plan. The pandemic and inflation that followed has prompted more Americans to realize the need to have an estate plan in place, for their own security and well-being, as well as for their potential beneficiaries. Read on to learn what estate planning is about, so you can start to determine how it may apply to you.
Estate planning includes a “last will and testament” as well as key elements, such as power of attorney, trusts and medical directives (also known as a living will). This process enables a family to ensure their investments and other assets will be protected during disability or illness, and properly distributed after their death while taxes and probate are minimized or avoided.
There are five key components to estate planning for the investor: last will and testament, trusts, power of attorney, medical directive and beneficiary designation. If there are also underaged children, then guardian designation is a sixth component that needs consideration so the custody of the children doesn’t become a lengthy and costly court battle.
There are several key benefits to estate planning for every investor to consider. Beyond protection for the individual’s assets there is also care and provision for the next generation. A solid estate plan will ensure that the estate transfer is as stress-free and cost efficient as possible.
There are many online tools that can help you set up an estate plan on your own, however, if an individual has several investments and other assets, and/or needs to set up a trust, or is not fully aware of all the estate related laws within their state, it is a good idea to hire a professional to have guidance throughout the process of developing and implementing an estate plan. By hiring a professional, you can be sure that all the taxes, finances and legalities have been taken into consideration and the best possible scenario for the beneficiaries will be implemented.
Estate planning can seem daunting, but every wise investor will recognize the benefits to having an estate plan and the importance of passing on their assets and wealth with a minimum of headache and stress for their beneficiaries. An estate plan is more than a will, and professional guidance may be necessary to be sure that all the bases are covered and a solid plan is crafted and implemented. Once the estate plan is put in place, it should be reviewed regularly to ensure nothing needs to be updated.
Why Is Estate Planning Important?
Estate planning is important to ensure transfer of wealth and assets to beneficiaries without unnecessary taxation, fees and probate.
Who Needs Estate Planning?
Every adult with any assets should have an estate plan. Even if the estate only consists of a car, a house and a small 401(k), there should still be an estate plan in place.
How Much Does Estate Planning Cost?
The cost of estate planning varies from state to state and also depends on if one has a complicated estate and needs an estate attorney to sort everything out. The fees and billable hours of an attorney can add up quickly, but an individual can mitigate this through careful planning and preparation. A basic will can vary widely from $150-$600, while a complete estate plan can be anywhere from $1,500 to $3,000 or more, since the hourly rate of a qualified attorney can be expensive. Every investor looking into estate planning should do careful research on the laws and requirements for estate planning in their state.
Is Estate Planning Tax Deductible?
As of 2022, the Tax Cuts and Job Act changed the tax laws in the United States, and estate planning fees are no longer tax deductible. However, it’s a good idea to keep this in mind and contact your accountant, as this may change again in the future.
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The information contained on this website is presented for informational and marketing purposes only and is not to be understood as legal advice. You should consult an attorney for advice respecting your individual needs. Renee E. Nesbit, Attorney at Law looks forward to speaking with you about your particular needs. Please note, however, that the mere act of contacting our firm does not create an attorney-client relationship. As a result, you should never send any confidential information to our office until a Representation Agreement has been signed by both you and Renee E. Nesbit, Attorney at Law.
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