Why Is Estate Planning Important?
Estate planning is important, especially for those with high assets. A good plan protects both your loves ones and the assets themselves.
If you don’t plan, the people who rely on you could be left wanting. Your property could be mismanaged, and your entire estate could dry up.
Here are some examples of what could happen without a good estate plan.
The state has a way to handle someone’s estate if they die without a will. This way is called “intestate succession.”
Essentially, there is a list of close relatives who immediately receive a portion of your estate when you don’t have a will. The state first gives assets to your spouse and children if you have either. Next in line are your parents, then siblings, and so on. If you don’t have an immediate family, a distant relative who you’ve never met could receive your property.
The Problems of Intestate Succession
Money Goes to the Wrong People
The word “family” has a much broader meaning these days. Many people disconnect from toxic relatives and create a surrogate family made up of friends. Others may have been raised by a kind aunt or uncle, someone they truly regard as their parent.
Intestate succession could give money to an abusive parent or estranged sibling, leaving out the people who deserve your assets
The State Manages Your Money
When intestate succession gives money to your children, it holds that money until they turn 18. The state manages your money during that time, and there is little that anyone can do about it. By the time they are of age, they could have far less of your wealth than you intended.
The state will also handle probate, where it pays off any outstanding debts and pays itself in the process. Adults who receive their portion sooner than the children could still have a fraction of what they need or deserve.
No Growth for Your Estate
Without an estate plan, your beneficiaries receive their portion of the money all at once. Substantial estates will give large chunks of money to these recipients. In many cases, this will encourage these beneficiaries to quit their jobs and simply live off your wealth. By the next generation, there may be nothing left.
Using good estate planning, you can build a trust for your estate. This is a living financial entity that can allow your assets to grow through investments and sales. A trust helps ensure that your wealth will live on, providing for your family long after you are gone.
Furthermore, a trust can manage your money in the present. You can elect a trustee or even a board of trustees to run your estate like a company.
Trustees can put your recipients on a steady allowance, keeping the bulk of your estate safe from squandering. They can have the power to cut off a beneficiary who is blowing their portion, and they can create stipulations for this person or other recipients. For instance, they could demand that any beneficiary must hold a steady, full-time job to keep receiving their allowance.
Ford & Friedman is here to help clients protect their wealth with estate planning, and we can assist with high-asset divorces. Contact us online or call us at (702) 904-9898 to schedule your consultation.