Estate planning is such an important yet often neglected part of financial planning. Many people assume that an estate plan is only necessary for the wealthy and elderly, but this misconception can have significant adverse financial and emotional consequences for one’s family and future.
If you, like many people, wonder if you need an estate plan, the short answer is, probably yes. However, Fidelity explores certain life events that may trigger the need for an estate plan sooner rather than later.
One of the most significant life events that trigger the need for an estate plan is the addition of children to your family. Besides allowing you to name a guardian for your children, wills and trusts within an estate plan can give you peace of mind that your wealth and other assets will go to your children in a manner you deem fit. For instance, a guardian of the estate can manage your wealth and distribute funds as needed until your children reach age, which is commonly between 18 to 21.
As of 2020, a legally married couple can exclude up to $11.58 million per spouse. If one spouse dies, the other spouse can assume the deceased’s exclusion, granting him or her up to $23.16 million in tax exclusions.
Should you ever accrue substantial wealth in your lifetime, a well-thought-out estate plan can help you reduce or possibly eliminate your estate tax liability.
If you own a business, you have some unique considerations to make regarding what will become of it should you pass away unexpectedly. If you want your business to go to your children, spouse or another heir, consider creating a business succession plan that makes it easy for you to pass your business assets and the organization on without complications.
Several special circumstances may warrant the need for an estate plan. Two, however, are more common than others. The first is remarriage and blended families. The second is having a child with special needs.
A carefully constructed estate plan can help you prepare for these and many other scenarios, all while protecting your family’s future.