Think you’re not wealthy enough to need an estate plan? Think again. Many people assume that estate planning is only for the ultrawealthy who may face estate taxes or complex asset challenges.
That assumption is usually incorrect. Estate planning isn’t just about minimizing estate taxes. It’s about providing a legacy for your loved ones that’s aligned with your goals and wishes. It’s about protecting your assets from threats like probate, fees, creditors and even financial mismanagement. Most important, estate planning is about making sure your loved ones will be financially stable and comfortable after you pass away.
An estate plan’s purpose depends largely on your unique goals and challenges. No two estate plans are the same. While many consist of the same types of tools, such as a will, a trust, life insurance and more, the purpose of those tools can vary depending on the individual’s needs.
What’s the purpose of your estate plan? You likely can answer that question by examining your own goals and wishes. Below are a few common purposes of many estate plans:
Provide financial security for your loved ones.
If you’re the breadwinner or primary financial provider for your family, your main objective may be to leave your loved ones financially secure after you pass away. Even if you’re not the primary financial provider, you still may wish to leave your loved ones with a financial legacy that can have an impact on their lives.
One way to do this is through life insurance. You can use life insurance to provide a tax-free legacy to your loved ones upon your death. A wide range of different types of life insurance policies with various features are available, which makes it possible to find a policy that fits almost any need or budget.
You also may want to think about how your assets are distributed. A will can be used to guide specific assets to the correct heirs. However, you may want to use a trust to retain some control over the asset distribution process. This is especially true if some of your heirs are minor children or may not have the tools needed to manage a sizable inheritance.
Minimize threats to your legacy.
Just because your estate isn’t sizable enough to face estate taxes doesn’t mean it won’t face any financial threats. Most estates go through a process called probate. That’s the legal process for settling an estate, and it usually involves paying taxes, liquidating assets, paying debts and handling other final affairs. The process can be time-consuming and expensive. However, you can minimize the cost of probate by leveraging tools such as life insurance, annuities, IRAs, trusts and other vehicles.
Your estate could also face debt related to your health care at the end of your life. Medicare doesn’t cover long-term care, so if you require that kind of assistance, your heirs could be forced to pay those costs after you pass away. Long-term care insurance can be an effective tool to pay for your end-of-life needs and protect your heirs from excessive medical debt.
Manage end-of-life care.
Estate planning isn’t only for matters that arise after you pass away. It can also be used to manage your care and finances during the final stages of your life.
Often, individuals face a condition known as incapacitation in their final days, months or years. Incapacitation is the inability to make or communicate one’s decisions. It’s often caused by cognitive issues such as Alzheimer’s. If you’re incapacitated, you may not be able to participate in your own financial or medical decision-making.
You can use tools like power-of-attorney documents, living wills and even a trust to manage your assets and ensure your wishes are met even if you become incapacitated. Without those tools in place, your loved ones may be forced to manage your finances and health care on your behalf, and they may make decisions that you wouldn’t have made for yourself.
Ready to start your estate plan? Let’s talk about it. Contact us at BAM Advisory Group. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
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