Posted in Triplett & Carothers on June 1, 2022
For many people, their reason for starting the process of estate planning is family. Estate planning is the best way to set up your family for success in the aftermath of your death. While it is not fun to think about preparing your own estate, death is an inevitable part of life, and it’s better to be prepared than to leave all of the work to your loved ones after you’re gone.
Choosing to prepare your estate even when it’s uncomfortable for you is a selfless and kind-hearted decision to make. By planning your estate while you’re still alive, you are letting your family know that you don’t want to burden them by leaving all of the complexities of dealing with your estate to them.
Instead of forcing your family members to make decisions on your behalf, you can tell them what you want them to do with your estate after you die. This will be a major stress reliever for your family and loved ones alike.
How to get started with estate planning
The process of preparing your estate starts with reviewing existing documents. You’ll need to familiarize yourself with various aspects of the estate planning process, such as choosing a power of attorney, creating a health care proxy or living will, drafting a will, writing your testament, and reviewing your revocable living trust.
Your life expectancy, financial habits, lifestyle, income streams, investments, assets, locations of beneficiaries, and tax bracket are several of the many details that you will need to keep in mind as well. While this can feel overwhelming, the pandemic introduced a lot of turbulence and volatility into our lives, and even though it was an unfavorable experience, the pandemic has also served as a reminder that anything can happen at a moment’s notice.
That’s why preparing for your death is important in terms of your estate. If you don’t take the time to write your own will and align your estate with your posthumous wishes, then state law will determine the outcome of your estate and what happens to your assets after you pass away.
State laws might distribute your estate in a way that you would not be happy with, so by planning ahead and preparing your estate, you will have full control over who benefits from your estate and who inherits your assets. Plus, the probate process is very time-consuming and exhausting, not to mention expensive, so you can help your beneficiaries avoid this by preparing your estate in advance.
Think about what your values are
Think about your priorities and take a moment to consider what is most important to you. What are you looking to accomplish by preparing your estate? How would you like to incorporate your children or other family members, if at all?
Have an honest conversation with yourself about what it is that you really want and how you would want your finances or other assets distributed amongst the people in your life. Talking to people you trust is another strategy that will help you keep your best interests in mind as you think about your loved ones.
To put things into perspective, let’s compare estate planning with business planning. As part of the chaos that unfolded as a result of COVID-19, business valuations were also impacted by the dips experienced by public markets and the changes that took place within the economy.
The virus forced many companies to close down, and as people started losing their jobs, there was much less demand than brands were used to, which caused a major adjustment period for everyone. For some companies, owners witnessed a significant loss in value as a result of the pandemic. Since then, many business owners have a newfound understanding of the importance of business planning.
Estate planning is very similar. While you don’t want to think about the worst possible outcome, being prepared just in case is essential. But how has estate planning changed since the start of the pandemic? What did it look like before COVID-19? Let’s take a closer look at that.
How estate planning has changed since the start of the pandemic
Over the past two years, interest rates were a lot lower, which means that times were more suitable for advanced estate tax planning processes than the current world allows for. Tax rates were experiencing a historic low, and people understood the benefits of taking advantage of depressed asset values.
The combination of depressed asset values, low-interest rates, and the highest exemption amounts to date have resulted in strategies that are designed to minimize the tax-related burden that your children or your beneficiaries will have to accept. A solid move is to focus on the assets that offer a high growth potential and offer them as gifts.
As long as you trust in the valuation of equities and their long-term growth potential, then depressed markets are a golden opportunity for you. Of course, everything mentioned today are merely examples. At the end of the day, your estate planning strategy must be specific to you and your situation.
Your best bet is to talk with your tax advisor. Ask them to assist you with the process of creating a personalized, thorough, and future-focused plan of action regarding your estate. The more tailored your estate planning process is to you and your preferences, the more content you will be knowing that you have set up your family for success in your absence.