We’ve all heard that having a trust, living will, and other aspects of an estate plan are essential, but estate planning almost always ends up on the back burner. After all, nobody thinks their life is going to come to an end tomorrow; we always believe we have more time.
In fact, some of the most famous people that ever lived died without an estate plan. Some names you might recognize include:
- Jimi Hendrix
- James Gandolfini
- Bob Marley
- Sonny Bono
- Abraham Lincoln
Unfortunately, the families of these people had to try and determine (often through expensive and time consuming litigation) what the person wanted to do with their money, and chances are, what ended up happening didn’t align with exactly what they would have wanted.
What Is an Estate Plan?
Everyone has an estate, even if it only includes clothes and a few bucks. When you die, your estate gets divided among the family, friends, and organizations you care about most. That’s where an estate plan comes in.
After you pass away, obviously no one can talk to you about your wishes. Estate planning is the process of planning while you’re alive where your assets will go when you die. You’ll name beneficiaries and what you want each of them to receive.
What Is a Trust?
A trust is an agreement that allows a named trustee to hold assets on behalf of a beneficiary. The agreement creates a fiduciary relationship whereby the trustee has a responsibility to act in the best interests of the beneficiary or beneficiaries of the trust.
Trusts are an essential part of estate planning for multiple reasons.
For example, some of your beneficiaries may be under 21 years old, and you may worry about their use of the inheritance you provide them. In this case, that inheritance can go into a trust, in which the trustee holds the money for your beneficiary until they reach an age you deem adequate for the inheritance. Trust planning gives you the ability to plan for these instances.
Why Trust & Estate Planning Is Important
There are several reasons trust and estate planning are important. Some of the most pressing include:
- Your Wishes: You’ve worked hard all your life to build the estate you have. It’s vital that when you pass, your legacy is carried on as you wish; trust and estate planning helps ensure that happens.
- Your Family: When you pass, you don’t want your family fighting over your belongings. You can protect your family from undue stress during an already stressful time by taking part in trust and estate planning.
- Reduced Tax Burden: There are several things you can do in your estate to minimize the tax burden your beneficiaries might experience when they receive the inheritance you left behind.
- Protect Your Assets: Estate planning can even protect your assets in life. However, the plan must be in place before you face a lawsuit or other event that could threaten those assets.
The estate planning process is something few people care to think about typically. After all, death and what happens with your estate when you pass can be difficult to discuss. However, taking the time to plan your estate today can protect you and your family. Contact Lawrence Israeloff, Esq., CPA, CFP® to get started today.
Lawrence Israeloff is an experienced attorney, CPA, and CFP who offers a one-stop shop for your trust and estate planning, tax, accounting, and business management needs.