Estate Plans: What Are They and Why Are They Important?
Estate plans are highly recommended for those of retirement age, as they allow you to have control over your assets and what happens once you have passed away, or if you lose the ability to make sound decisions as you get older.
Many people don’t get around to creating an estate plan, but this not only wastes the assets you have built up over your lifetime but can also cause problems for your loved ones in your absence. Here are some of the many benefits of planning ahead.
When you pass away you leave an estate, and without an estate plan someone will be appointed to make decisions about your assets, for example any active bank accounts you have. This could be someone whom you do not trust or who has been presumed to know you well when in reality they do not. This person could have malicious motives meaning that they benefit from your passing while those who deserve to don’t.
If your children are under the age of 18 when you pass, they will have to be put into the care of others. An estate plan allows you to choose a guardian for them, giving you peace of mind that they will be well looked after in these circumstances. Without a nominated guardian, they could end up in a dangerous environment. Similarly, if you have disabled children who are in receipt of financial help from the government, without an estate plan they could end up losing their grant.
Estate plans include the assignment of certain assets to certain people. Without one, your assets would be shared out according to traditional family structures which may not be suitable. For example, if you have children from previous marriages, or arrangements with ex-spouses, they might miss out. You may also have fallen out of touch with certain family members for good reason, yet they could still end up benefitting from your passing.
Additionally, estate plans allow you to decide what happens to your assets if your child passes away or divorces their spouse, so you can make sure they stay in your family rather than anyone else’s. If you own a business you also get to decide who the ownership goes to, so you could choose someone who has contributed and will look after it well, rather than someone who would simply sell it for their own gain.
If you are in debt by the time you pass away, having an estate plan that takes this into account allows you to pay it off using your estate, rather than passing it down to relatives. You can also use it to pay for the future medical costs of your dependents, otherwise known as Medicaid estate recovery. Taking out life insurance as part of your estate plan also provides an income for your dependents, so that they don’t suffer financially when you pass away.
As you can see, estate planning is incredibly important as it helps you to protect your loved ones, avoid your assets getting into the wrong hands, and pay off your debts rather than passing them on. If you have a parent or someone you know who is retiring soon, then why not check out these tips on how to help your parents retire peacefully here?