By Ron Carson, Forbes, May 5, 2019
Estate planning remains one of the most misunderstood areas of planning. Over the years, I’ve met with people who “only needed a financial plan, not an estate plan” or “didn’t need a financial plan, just some help with estate planning.” I’ve also met with people who labeled themselves too young (or too old) to engage in estate planning. What they were all missing is that estate planning is an integral part of a comprehensive financial plan, not something that sits outside of it.
That’s because estate planning is part of life planning. It’s about defining and living out your legacy during your lifetime, enabling you to enjoy the impact it has on the people and organizations you support; ensuring loved ones who depend on your income are protected in the event of your incapacity or death; and ensuring your own wishes and preferences are communicated and can be met should you require long-term care, among other goals. It helps to answer important questions, including: Who will have the legal authority to act on your behalf if you’re unable to do so during your lifetime, whether that’s managing your assets or important healthcare decisions? And who is going to be tasked with making sure it happens?
To help clarify the role of estate planning in the financial planning process, it’s important to debunk some of the most common myths, beginning with: Who needs an estate plan?
MYTH #1: Estate planning is only for the high net worth.
Often, people believe that estate planning only benefits the uber `wealthy, but nothing could be further from the truth. If you own property and assets or have loved ones that depend on you to provide for their income or care, you have an estate and need a plan—regardless of your estate size. Estate planning is something everyone needs to engage in regardless of age, estate size, or marital status. If you have a bank account, investments, a car, home or other property—you have an estate. More importantly, if you have a spouse, minor children, or other dependents, an estate plan is critical for protecting their interests and their future income needs.
An estate plan can help you accomplish these and other important goals:
- Protect those who depend on you and your income during their lifetime.
- Name guardians for minor children.
- Name the family members, loved ones, and organizations you wish to receive your property following your death.
- Transfer property to your heirs and any organizations you’ve named in your estate planning documents in a tax-efficient and expedient manner, with as few legal hurdles as possible.
- Manage tax exposure.
- Name your executor and/or trustee – the individual(s) or institution you appoint to act as your proxy in settling your estate and distributing your property.
- Avoid probate, the court process for proving that a deceased person’s will is valid.
- Document the type of care you prefer to receive should you become ill or incapacitated, including any life-prolonging medical care you do or do not wish to receive.
- Express your wishes and preferences for funeral arrangements and how related expense