Putting your financial affairs in order before you pass away may not seem like a pressing task but is certainly one to prioritize, especially if you have loved ones you will be leaving behind. Correct estate planning will ensure their inheritance will not be taken away by the taxman and any scenarios which could contest your wishes will be avoided. This article will explore in more detail some of the reasons why estate planning is so important.
Helps Avoid Disputes
Proper estate planning can avoid any disputes between family members and the potential costs of hiring a solicitor to settle your estate. Most family disputes over inheritance arise when there is no will in place which sets out the deceased’s intentions regarding the distribution of property and other assets. This can be particularly controversial when the deceased was married numerous times and has children from each marriage, as there are more claimants asserting their rights. To avoid these situations, you should create a legal will that clearly provides for the distribution of your assets upon your death.
Helps Avoid Probate
Probate is the court-authorized process that deals with the distribution of the deceased’s estate. Probate is necessary when the deceased dies without a will or has not taken steps to avoid it by legally settling and distributing their assets before death. It is then left to the courts to do this which can be a lengthy and expensive process and one which may have unintended consequences as your wealth can end up in the hands of unwanted beneficiaries.
With public access to probate records, there is also a loss of privacy, and all of your family members as well as your creditors will be able to use this information to assert their right to your assets. The laws regarding probate vary according to state, so it is advisable to speak to an experienced attorney such as Bay Area probate to see whether probate is necessary.
Reduces Tax Liability
Estate planning is essential for ensuring your wealth is not eroded by unnecessarily paying taxes to the Internal Revenue Service (IRS). Through proper estate planning, you can take measures to reduce or eliminate the taxable income upon your estate as well as the amount of tax any beneficiaries may have to pay. For example, you can ensure certain assets will not be subject to federal estate tax if they are held in a trust.
Other techniques to reduce tax include making use of gift tax benefits which allow for the transfer of assets to beneficiaries without incurring any tax. Charitable donations or gifts made to charities upon death can also be made tax-free, further reducing the value of your estate and any tax liability on it.
Protects Your Family
An estate plan can ensure a secure future for your family after your death. This is especially important if you have young children as an estate plan can ensure they will be financially supported, and also designates a guardian for them in the event that they are left without both parents, rather than leaving this to a court to decide.
As this article highlights, the importance of estate planning should not be underestimated. Without an estate plan there could be legal, financial and personal consequences for those you leave behind.
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