The Five Reasons for Establishing an Estate Plan

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Estate planning is often looked at as a chore that can be pushed off as long as you are healthy. However, the unfortunate truth is many people wait too long before getting a plan in place. Having a proper estate plan ensures that your assets are protected both during your life and after your passing. Therefore, to truly understand the benefits of an estate plan, you should consider the five reasons for having one.

1. Naming a Power of Attorney

The most significant aspect of an estate plan is the protection of your assets. Therefore, one of the most important things a plan does is to appoint a power of attorney, or an agent who acts on your behalf. A power of attorney helps to manage either some or all of your estate should you be unable to do it yourself. However, despite rumors, a power of attorney does not only take effect if you are incapacitated. There are different levels and variations of this type of agreement, and each should be discussed with a licensed estate attorney.

2. Distribution of Assets

In the event of your death, the estate plan stipulates your assets as well as beneficiaries of those assets. These stipulations are typically outlined in a will and are carried out by an executor. The executor is either named by you or appointed by the courts.

3. Reduce Taxes

Also, adequately established and legally binding estate plans can limit the amount of transfer taxes. For example, there are currently federal laws in place that allow for tax exemptions for annual financial gifts after death of up to $15,000. Also, you are able to avoid the gift tax by paying educational or medical expenses of someone.

4. Sustain Charitable Giving

Estate plans can also help you maintain your legacy after your passing. If you are fond of any particular charities, you can leave specific assets to be gifted at the time of your passing.

5. Protect Against Creditors

Also, an essential thing for people designating beneficiaries to consider is that the inheritance is protected from creditors. There are wealth transfer strategies that can be put in place through estate planning to guard against just that. For instance, placing money into a family trust and appointing a trustee can limit the interference of beneficiaries creditors.