Estate planning isn't something that most people think about very often. In fact, most people don't even realize they have an estate. They tend to think of an estate as a fortune substantial enough to qualify for a federal inheritance tax.
As of 2016, that amount is $5.45 million dollars, an amount that relatively few people are able to amass within their lifetimes. However, in legal terms, most people actually do have an estate, and it's often worth far more than they realize. For example, estates include pensions and life insurance policies, among other things.
An estate can be anything of value, including sentimental value, that you wish to pass on to a particular person. Your great-grandmother's wedding ring may not be worth a great deal financially, but the knowledge that your great-grand-daughter will be able to wear it someday is priceless. A baseball collection or a favorite painting by an obscure artist worth very little today could be worth a small fortune fifty years from now. Estate planning gives you control over who will receive your financial assets and personal property, rather than allowing the state to decide for you.
While some assets, such as individual retirement accounts and life insurance proceeds, go directly to the beneficiaries, the state decides the fate of any property not named in a will. A will helps guarantee that your wishes regarding the disposition of your property are respected and carried out accordingly. Other benefits of drafting a will include minimizing taxes and avoiding the lengthy, and costly, process of probate. The executor that you name in your will ensures that your estate is administered according to your specific instructions.
Many healthy young people, including parents, consider estate planning something that's only necessary for elderly people. However, an important part of estate planning is designating a trusted guardian for minor children in the event of accidental death or disability. Through careful estate planning, you can ensure their financial futures by stipulating that insurance proceeds be held in trust, and that specified allocations be dispersed periodically throughout their lifetimes.
Whatever the size of your estate, estate planning is the best way to ensure that your loved ones continue to benefit from it after you're gone. Contemplating the reality of death is difficult, but having to make important personal and financial decisions while grieving is even more difficult. Planning for life's future eventualities today can help spare your family from further suffering when those eventualities become realities. It can also help you rest easier today.