Why is Estate Planning Important?
Estate planning is a critical component in managing one’s assets. Perhaps most importantly, it can help ensure that an individual's assets are passed on to their family members or chosen beneficiaries in a manner that may help guarantee their continued financial security. In this article, we’ll discuss five reasons why it’s important to create an estate plan.
#1: Protect Assets from Legal Battles
One risk that wealthy people face is the possibility of legal battles when an estate is distributed without any clear plan. This legal back-and-forth can drag on for years and cause immense financial and emotional damage to the beneficiaries and their relationships. Working with a qualified estate planning attorney to develop a well-documented and clearly defined estate plan can help protect one’s assets (and beneficiaries) from these legal battles.
#2: Maintain Family Harmony
Along a similar vein, having an estate plan in place can help maintain family harmony. When assets are not distributed fairly, or there is a lack of clarity in the distribution of assets, it can lead to family disputes, which can cause long-lasting damage. Creating a well-defined estate plan in collaboration with a trusted attorney and making sure everyone is aware of it can help protect one’s family dynamic.
#3: Plan for the Future
Having an estate plan is a necessary component of planning for one’s financial future, particularly for those who have substantial assets. By carefully considering one’s assets, liabilities, and beneficiaries, an individual can work with an attorney to create a plan to distribute their assets in the most efficient and appropriate manner possible. In doing so, one can feel more assured that their loved ones will receive their estate without any unnecessary disputes or surprises. A well-prepared estate plan truly is a vital part of a stable financial future.
#4: Potentially Reduce Taxes
Proper estate planning can potentially reduce one’s tax liability, leaving more of the individual’s hard-earned money to their beneficiaries. There are several legal ways in this scenario to potentially minimize the tax burden, such as establishing a trust or gifting assets to family members. To minimize estate taxes, however, it is essential to understand various tax provisions and laws. Working with a professional estate planning attorney can help an individual establish an estate plan that is both comprehensive and tax-efficient.
#5: Create a Legacy
Lastly, but certainly not least, having an estate plan gives one the ability to craft a meaningful legacy. Many people want to leave a lasting legacy that goes beyond their wealth. Developing a detailed plan that outlines what assets go where and how they will be used can help someone create a legacy based on their values, principles, and beliefs.
The importance of having an estate plan cannot be overstated. Setting one up can potentially protect one’s assets from legal battles, help maintain a harmonious family dynamic, assist with planning for one’s future, possibly reduce taxes, and help create an impactful and value-aligned legacy. It is always a good idea to consult with an attorney who specializes in estate planning to ensure that one’s assets will be passed on to their desired beneficiaries. Putting an estate plan in place is an investment in one’s future financial security and their family's well-being.
Disclaimer: Lincoln Financial Advisors Corp. and its representatives do not provide legal or tax advice. You may want to consult a legal or tax advisor regarding any legal or tax information as it relates to your personal circumstances.