Have you ever been advised that you should have an estate plan? You hear the advice and, like most folks, dont have a clear idea of why you should have one. I read an article by financial planner Elaine Floyd, which outlines the reasons why you should have an estate plan.
Lets start with the benefits. An estate plan allows you to:
- Direct the distribution of your wealth at death. An estate plan allows you to name the people, or charities, that will receive your assets. Otherwise, the courts will decide for you based on the laws of succession in your state.
- Save on estate taxes. The estate tax still exists at least until 2009. In 2010 it will be repealed but may come back in 2011. This year, assets that total up to $2 million are exempt from federal estate taxes. The top tax rate on assets above that amount is 45%. Keep in mind that state inheritance tax has not been abolished either.
- Save money on probate fees and keep your privacy. Probate fees can run up to about 10% of your estates value. Keep in mind that probate is time consuming and a matter of public record.
- Protects assets while you are alive. Estate planning strategies can help protect you in case of lawsuits and divorce.
- Prepare for incapacity. What happens if you are unable to handle making the payments for the care you receive while incapacitated? Who will manage your care and finances? An estate plan can help assure your well being if you become unable to make your own decisions.
So what are we all waiting for? Do an estate plan and do it soon. Think about the above issues. Remember that if you set up a will, or revocable trust, you can always make changes and make the trust to be a work in progress. Getting started will at least get you into the mindset of estate planning and may help you figure out who should receive the fruits of your labor.
Jonas Zamora is a Certified Financial PlannerTM professional. You may contact him at firstname.lastname@example.org.