Do you own assets like savings accounts, investments, and property? Regardless of your age, you need a will to protect your family and your wealth in the event of your passing. Nobody likes to admit that they’re mortal, but it’s a fact.
Preparing for the event of your death may seem like something creepy to do. Some people describe thinking about their passing and its effects on those around them as heartbreaking. Still, you must make provision for unforeseen events and circumstances in the future. No-one can tell when it’s their time to go, and preparation is key to ensuring your legacy lives on through your family.
It’s for this reason that writing a will is such a critical part of estate planning. Your will is your direct, legally-binding instruction, for the distribution of your assets and responsibilities in the vent of your passing.
Here are a few reasons why you need to consider writing a will as soon as possible.
You Own Assets
- 1 You Own Assets
- 2 You Can Select the Right Guardian for Your Kids
- 3 You Can Avoid a Lengthy Probate Period
- 4 You Can Minimize Estate Taxes
- 5 You Control the Winding-Up of Your Estate
- 6 You Can Disinherit Individuals
- 7 You Can Make Donations and Gifts
- 8 The Promise of Tomorrow Comes with no Guarantee
- 9 How to Write a Will
- 10 How to Find the Right Estate Planner
- 11 The Costs of Estate Planning
- 12 The Final Thought – Review and Update Your Will Every Year
Typically, assets are stores of wealth, such as cash savings accounts, gold coins, property, or artwork. However, assets also include other investments that earn you income, such as businesses or stock portfolios.
What happens to these assets in the event of your death? If you don’t have any legal paperwork guiding the distribution of your assets, then there’s a good chance the state will end up with most of your wealth.
We’re pretty sure that you have the intention of avoiding the attention and taxation of the government as much as possible after your passing, as much as when you were alive. If you have a family, then you’re going to want to leave everything to them. If you’re single and have no immediate family, maybe you want to leave your assets to a charity of your choice.
The point of the matter is that you should have the right to determine what happens to your assets in the case of your death. Having a will lets you have the control of how you distribute your assets to your loved ones. Maybe you want your businesses run by your son or daughter, or both of them. Perhaps you don’t want to sell a specific property, or you want to make a charitable donation from your wealth to an organization you value.
Whatever your final demands and requests, a will is paramount to having your wishes executed in the eyes of the law.
You Can Select the Right Guardian for Your Kids
Some parents don’t like to think about what would happen to their families in the event of their passing. While it’s an uncomfortable situation to think about, it’s vital if you want your legacy to thrive when you’re gone.
If you perish in an accident, how will your family survive? Who gets control of your assets? All of these questions are tough to answer. However, let’s take it a step further, what if both you and your partner were to pass in the same accident. Never mind your assets, who would get control of your kids?
Your kids are the light of your world, and your legacy to humanity. The last thing we think you want is for the state to take them under their supervision. Supervised care and entrance into the foster care system is rough on a child’s mental development.
With a will, you can nominate a caregiver and guardian to your children in the event of your passing.
You Can Avoid a Lengthy Probate Period
After issuing your death certificate, the state freezes your assets until the court distributes them according to the instructions in your will or estate planning. During this probate period, there’s nothing your family can do to access your wealth or assets.
Your estate needs to go through the probate process, regardless of whether you have a will or not. However, having a will reduces the probate period significantly.
If you die without a will, it’s known as dying “intestate.” If this situation applies to you, then the state decides how to divide your estate, and they don’t have to listen to your family’s requests. There’s a chance they could liquidate everything and award it to the federal or state government.
You Can Minimize Estate Taxes
By leaving a will with explicit instructions for financial gifts and dividing up your assets, you reduce your estate taxes to the government. Taxes are one of the most significant concerns of dividing your estate after your passing.
In some cases, you may require the use of a tax professional to help you with your estate planning. These professionals can give you insight on financial gift limits, and the best way to structure your asset distribution while minimizing tax obligations.
You Control the Winding-Up of Your Estate
When you draw up your will, you choose the executor for your estate. You can use your family’s lawyer, or you can choose a family member as the executor. However, if you die without nominating an executor, the court assumes this responsibility.
If you have any creditors, they may apply to the state to liquidate your assets to pay the debt. For instance, let’s say you have a personal loan for $50,000 that you used to remodel your home. In the event of your death, the lender can apply with the courts to liquidate your home to pay the debt.
Therefore, your $350,000 gets sold at auction for $200,000. The debt gets settled, netting your family a profit of $150,000, which is $200,000 under market value. If you had a will that nominated your executor, none of this would happen.
You Can Disinherit Individuals
With a will, you can ensure the accurate execution of your final requests and demands. If there’s anyone you want to leave out of your estate, then writing a will allows you to disinherit individuals as well.
For instance, you may have remarried and want to leave your ex-wife out of your will for whatever reason. By including these terms in your will, you ensure that she does not challenge your family legally for a share of your estate.
You Can Make Donations and Gifts
The federal gift tax allows taxpayers to secure a lifetime gift value of $11.18-million, tax-free. This figure includes all of the cash gifts you make to family and friends over your lifetime that are over the annual cash gift exclusion limit of $15,000.
By leaving your assets as gifts to your family, you ensure that you pay as little tax to the government as possible. This strategy keeps your wealth in the hands of your family, instead of the bureaucrats in Washington or state officials.
The Promise of Tomorrow Comes with no Guarantee
The most important part about having a will is to protect your family and your legacy from uncertainty. We never know what’s going to happen in our lives, and that’s part of what makes being alive such a unique experience.
Protect your family from the pitfalls in life, and ensure they get control of your assets after you pass. Don’t leave things to the good intentions of the government. The last thing you want is for your family to suffer financially in the wake of your passing.
How to Write a Will
Here’s everything you need to know about writing your will.
- Do It Yourself or Hire a Professional? – We always recommend that you hire a professional estate planner to assist you with drawing up your will. There are plenty of horror stories where people who decided to do it by themselves left out critical steps. As a result, the courts do not recognize the will and take control of the estate. Don’t let this situation happen to your family; make sure you use a professional to draft your will.
- List Your Beneficiaries – Lit all of the beneficiaries you want to include in your will. You can leave out or include anyone you want. If you do want to leave out a specific family member, then make sure you list it as so in the will. You have no obligation to explain why you choose to include or exclude family members from your will
- Nominate an Executor – We always recommend leaving a family attorney as the executor of your estate. However, if you don’t have a lawyer on retainer, then make sure you choose a close family member as the executor. This part of the will could be the most important. Remember, if you decide to leave a bank or financial institution to manage the execution of your assets and estate, then they can charge up to 4-percent of the estate’s value in fees.
- Choose a Stable and Responsible Guardian for the Kids – Remember to nominate a suitable guardian for your children if they are under 18-years old. Your kids are your most important responsibility in life. Make sure you appoint a guardian in your will and always discuss your decision with the potential guardian.
- State what Assets Beneficiaries Receive – Avoid vagueness in your will. Make sure you clearly explain who gets what. This strategy helps to avoid confusion and in-fighting between estranged family members that may be desperate to get their hands on your wealth. For instance, your third wife may think that she has a claim on your assets, and hires expensive lawyers to dissolve your estate and hand her control. A will prevents these hostile situations from occurring to your family in the wake of dealing with your passing.
- Attach Your Final Wishes to the Will – In the movies, we always see how the family gathers in the lawyer’s office to hear the reading on the will. In reality, this does not happen. However, you can leave your will and a final letter to your family with the executor. Some institutions deliver the letter to the surviving family members along with a copy of the will and relevant documents.
- You’ll Need Witnesses – When finalizing your will, you need a witness of legal age, over 18-years old, to sign the documents. Many states require two witnesses to sign the will, and in some states, you’ll need three witnesses.
- Store Your Will Somewhere Safe – Finally, you’ll need to store you will somewhere safe where your family can access it in the event of your death. A safe at home, or a deposit box at the bank, are both good options.
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How to Find the Right Estate Planner
Finding the right estate planner is like finding the right financial advisor – it’s a challenging thing to do the right way. There are hundreds of thousands of estate planners, and all of them produce varying results. We recommend you work with an established firm when choosing your estate planner.
Ask your financial advisor for recommendations. Many companies that offer life insurance also provide estate planning services, and they may also come as a part of your full-service brokerage offering. If you don’t have any financial advisor to rely on, then you can still hire the one-off services of an estate planner to help you draft your will.
The Costs of Estate Planning
Estate planning is reasonably affordable. Some firms may offer no upfront costs for managing your estate planning, and they make their money when they execute your estate. The firm will charge between 2 to 4-percent of the value of your estate for their services. However, this is a small price to pay when you think about the benefit it leaves with your family and your legacy.
Otherwise, if you choose a family member to handle your estate, they’ll need to have financial advice from a lawyer and an advisor when executing your final wishes and distributing your assets. You’ll need to account for these fees. Make sure that your family has the necessary funds available to cover any death taxes owed to the government on your passing.
The Final Thought – Review and Update Your Will Every Year
Make sure you keep your will updated at least every year. Time passes quickly, and you might acquire new assets or investments that you neglect to add to your will. Keeping your estate planning up to date will ensure the prosperity of your family and the security of your legacy long after your passing.