Estate Planning is Eerie-sistible!

By Taylor Cole, CFP® , Wealth Advisor 

We’re officially into the fall season, which in addition to (arguably) prettier foliage and cooler weather, brings to mind the scary stories, spooky movies and ghoulish tales of Halloween. But haunted houses are not the only thing that can be downright terrifying, give you a shock, and make it hard for you to sleep at night. A poorly made or forgotten-about estate plan can leave your loved ones vulnerable to hauntings of the financial kind. Most ghost stories are about unfinished business, and failure to design and implement an estate plan is just that - unfinished business.

No one likes to think about their own mortality but in honor of Halloween and National Estate Planning Awareness week, we thought it would be fitting to share a few tricks and treats to “creep” it real.

Estate planning is not just for seniors so don’t procrastinate!

An often-mistaken belief about estate planning is that it is something that you do when you’re older or retired. However, estate planning revolves around so much more than just the distribution of your assets when you pass away.  A proper estate plan also incorporates the management of your financial and medical decisions should you become incapacitated, your desires for any minor children, and what your end-of-life wishes are. We all procrastinate about things throughout life, and for many people, that includes estate planning.  Whether it's getting your estate plan set up or getting your existing plan reviewed on a regular basis, don't let procrastination become one of your biggest regrets! 

Oh, my gourd! Will, trust or both?

The term “intestate” describes a person who dies without a valid will. This means your state’s intestate statues will determine asset distribution, which may not align with your wishes. 

A will is a legal document reviewed at your passing that impacts how your estate will be distributed among your heirs. In some cases, a will is all that is necessary to effectively split your assets among your beneficiaries. However, a will must go through the probate court which can take time and becomes part of the public record. This means anyone can pull the information from court records, receive a copy of your will, view information listed such as the value of your property, your beneficiaries, and their addresses.

For more complex estates, a trust can be a valuable tool. A trust is a legal arrangement that allows you to transfer ownership of your assets to a trust account, either before death or at your death. You assign a trustee to be responsible for the assets in the account on behalf of your beneficiaries. A trust provides privacy as the court record will only list the trust, not your assets in the trust or your beneficiaries. Trusts come in revocable and irrevocable flavors, which serve different functions.

Here are a few ways a trust can benefit your estate plan:

• Protect and preserve your assets from creditors (irrevocable trust.)
• Potentially minimize federal or state estate taxes (irrevocable trust.)
• Customize and control how your wealth is distributed.
• Address family dynamics such as divorce and blended families.
• Help a parent or other relative manage their financial affairs.

An estate plan spares your heirs a big tax bite.

Estate planning is about protecting your loved ones, which includes protection from the IRS.  Transferring assets to heirs with the goal of creating the smallest possible tax burden for them is essential to estate planning. While the complexity varies greatly based on your net worth, a little planning goes a long way in enabling you to reduce much or even all your federal and state estate taxes and state inheritance taxes. There are also ways to decrease the income tax beneficiaries might have to pay. Without a plan, the amount that your heirs could owe Uncle Sam is substantial.

Your estate plan, or lack thereof, does not need to be a spooky story. If you want your assets, yourself, and your loved ones protected, you will need an estate plan of some variety. That is why here at Woodward Financial Advisors we take the time to review and discuss your estate plan. We encourage you to reach out and continue this conversation!

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