Estate planning is an aspect of financial planning that some people may not be eager to tackle, as it forces us to imagine and plan for what happens after we die. It’s important to plan effectively to ensure a smooth transition. Even if you’re young or feel like you don’t have sufficient assets to warrant the associated costs, having a plan in place will provide you peace of mind, as well as your loved ones.
What Is Estate Planning?
Simply stated, estate planning is a method for determining how to distribute your property after your death or should you become incapacitated during your lifetime and unable to manage your affairs. It is the process of developing and implementing a master plan that facilitates the distribution of your property according to your goals and objectives. An estate plan is comprised of legally binding documents that ensure you are in control of what happens to you, your assets and any dependents you may have if you become incapacitated or when you pass away. If you die without a will, your assets will pass according to the rules of intestacy of your state of domicile. A comprehensive estate plan can help you feel more confident about the future, knowing your loved ones will be taken care of and the legacy you leave behind aligns with your desires.
There are some estate planning documents everyone needs regardless of your age, health or wealth:
- Power of Attorney for financial matters
- Advance Medical Directives
- Last Will and Testament
- Revocable Living Trust (in some cases)
As a process, estate planning requires effort on your part. Initially, as hard as it may be, you’ll want to come to terms with the idea of dying—at least to a degree that you can carry out the necessary planning. You will understand the process more easily and implement a more successful plan if you approach it in a straightforward manner. Planning now can help minimize expenses in the future, such as taxes and probate fees. This also ensures your survivors will have less to worry about when you are no longer around. Failing to act now could lead to unintended complications for your descendants.
Who Needs Estate Planning?
Estate planning may seem like something only wealthy individuals would benefit from; however, this is not the case. Estate planning is important to individuals with a wide range of financial situations. Wasting even a single asset to unnecessary expenses or mishandling may cause your loved ones to suffer from a lack of financial resources.
Estate planning can be as simple as implementing a will (the cornerstone of any estate plan) and purchasing life insurance, or as complicated as executing trusts and exploring other sophisticated tax and estate planning techniques.
You may also want to develop plans for your estate, especially if you have any circumstances like the following:
- You intend to contribute to charity;
- You’re a business owner;
- You have minor children or children with special needs;
- Your spouse is uncomfortable with or incapable of handling financial matters;
- You have strong feelings about healthcare decisions;
- You have property in more than one state;
- You have unique assets, such as artwork or collectibles; or
- You have privacy concerns or want to avoid probate.
Having a fully executed plan in place, regardless of your situation, is important.
How to Get Started
With all the personal, legal and tax considerations, it can be overwhelming knowing exactly when and how to begin the process. Designing a plan is a process that is unique to each individual. Even the most complex plan can be achieved if you proceed step by step:
- Clarify your goals and objectives;
- Seek professional help;
- Understand the factors that will affect your estate;
- Understand the strategies that are available;
- Formulate and implement a plan; and
- Perform periodic reviews.
It’s recommended that you seek help from professionals who can help you navigate through areas of the planning process. In addition to consulting with an attorney, your financial and tax advisors could also be helpful. The cost of drafting an estate planning strategy varies widely based on your current situation, goals and location. Remember, the peace of mind that comes with developing a successful estate plan is worth the time, effort and expense.
Once your plan is implemented, the importance of periodic reviews cannot be overstated. Changes in laws, especially those concerning estate taxes at the federal and state level and life events such as marriage, divorce or the birth or death of a family member may make it necessary for you to revise your plan.
The conversation around estate planning may be difficult. However, it should not be ignored. Think about the other things you can focus on and enjoy, when you don’t have to worry about what happens when you can no longer make the decisions.
Many clients find that although these topics are difficult to discuss, they have greater peace of mind knowing that they have a plan in place. By collaborating with professionals on the Busey Wealth Management team, you can initiate the process of preparing for your own and your loved ones' future. To discover more about our comprehensive range of services or find an advisor, visit busey.com/wealth-management.
This is not intended to provide legal, tax or accounting advice. Any statement contained in this communication concerning U.S. tax matters is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties imposed on the relevant taxpayer. Clients should obtain their own independent tax advice based on their particular circumstances.
This material is provided for educational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities.
This presentation is for general information purposes only. It does not take into account the particular investment objectives, restrictions, tax and financial situation or other needs of any specific client.
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