When you’re picturing the reading of a will, you might be picturing a grieving family in black designer suits sitting in a study full of leather-bound books, waiting to see who will inherit the better part of the billion-dollar inheritance.
With this image in mind, we get it when you ask, “Do I need a will? Really?”. Here’s the thing, the task of writing a will is a responsibility that every adult should take on, even if you’re young, healthy and don’t have a lot in the bank.
What is the purpose of a will for everyday people? Since life is unpredictable, lawyers often recommend that people plan their will as soon as they become legal adults. You might not have a mansion and offshore accounts, but a will can still distribute your assets without sending your loved ones to court. It can protect your minor children and even your pets. In short, writing a will is a gift to those you leave behind.
What Is a Will and Estate Plan?
An estate plan will typically include your will but will also include other documents to help communicate your wishes should you die or become incapacitated. Here’s a quick breakdown of the elements you might find in a comprehensive estate plan:
- Will: A will covers your wishes for the distribution of your estate and the care of any minor children you might be responsible for.
- Trusts: Creating a trust in the name of your beneficiaries can limit tax liability on an inheritance.
- Power of Attorney: This directive designates one person to have power over a living person’s finances if that living person no longer has the capacity to make those decisions. Typically the person given power of attorney is someone close such as an adult child or a spouse.
- Advanced Healthcare Directives: This document tells your medical care team what your wishes are when you can’t communicate.
Why Is Estate Planning Important?: The Financial Ramifications of Not Having a Will
Writing a will can be a great relief to loved ones in trying times. Not only does it make a dark and difficult moment simpler but it can have a real financial impact on your beneficiaries.
Dying without a will is called intestate death. If this happens, a probate court will disperse your assets, forcing your grieving beneficiaries to deal with red tape. Different states have different policies regarding how those assets will be dispersed so you can’t be sure who will end up with your assets. When those assets are distributed without the use of any trusts or other resources often put into play to reduce tax liability, taxes can eat away at your beneficiaries’ inheritance.
Families of those who die intestate may also suffer from interpersonal disputes and lawsuits over the care of minors as well as asset distribution. A will is especially important when you care about where certain assets end up for both financial and emotional reasons. For instance, you may want to ensure a pet ends up in a safe space with monetary assets to support the pet’s care.
Benefits of Incorporating Wills and Estate Plans in Financial Planning
Why is estate planning an important component of financial planning? Estate planning ensures that your assets will easily transfer into the hands of your loved ones in a time of hardship. A will may also provide tax breaks to your beneficiaries. You can do this by setting up trusts and charitable contributions.
One of the most important reasons to create a will is to protect your minor children through guardianship designations and set up trusts to help provide them with financial support. Deciding on guardianship gives parents a certain peace of mind, ensuring children would be raised by trusted people who care about the minors in question. A clear guardianship designation can also protect children from being thrown into a legal battle for custody.
What Is the Purpose of a Will For Business Owners: Succession
If you’re a business owner, including succession planning in your estate plans is important. This kind of planning ensures that your business will continue in the event of your death.
Succession planning examines businesses for crucial roles and provides action plans for people within your business to take those roles when you’re gone. Writing succession plans into your will is imperative for protecting your business’s legacy.
Professional Guidance in Crafting and Updating Your Estate Plan
While you can legally write your will yourself, a will written with a witness carries more weight. Seeking expert care is important, here are a few items to discuss with an estate planning attorney or a financial advisor:
- Name Your Beneficiaries: When your beneficiaries are named, your estate won’t go to probate court.
- Living Trusts: This is a good solution for bequeathing property to someone who’s not mature enough to keep the finances of an estate straight.
- Gifting: This can be done while you’re living. An advisor can help you confidently give the right amount of money to your beneficiaries without breaching the IRS annual gift tax exclusion.
There are many other aspects of a will to cover, which is why collaborating with a professional for a comprehensive approach can be so valuable for beneficiaries of your estate. Once your estate plan is written, you’ll want to regularly return and adjust your will when your financial situation changes or your family grows.
Planning For the Future: You’re Not Alone
Most financial planning is about planning for your future. Estate planning is about planning for the future of the people closest to you once you’re gone. While estate planning and will writing might be heavy, it’s important to know that you don’t have to do it alone. Turning to professionals for help can ensure that your friends and family have all the documents they need in an emotional and confusing time.
Becoming a member of DCU provides you with confidence in your financial decision-making as you can turn to the education and guidance provided by the credit union. Whatever next financial step you’re planning, when you’re a member, you don’t have to do it alone.
This article is for informational purposes only. It is not intended to serve as legal, financial, investment or tax advice or indicate that a specific DCU product or service is right for you. For specific advice about your unique circumstances, you may wish to consult a financial professional.
