Most of us don’t like to think about death, but as uncomfortable as it may be to think about, if you put off proper planning you risk subjecting your loved ones to a financial disaster—just as they’re trying to deal with the emotional impact of a loved one’s passing.
You’ve worked hard to design your life, to save and invest your money, and to survive against all kinds of disasters, but do you know where your money will go when you pass away? Do you know who will take care of your children? Do you know who will make life or death medical decisions for you if you are unable to? Your financial makeover won’t be complete without addressing these sensitive, but critical issues.
Estate planning conjures up images of death, aristocrats, mansions, and bitter family disputes.
Most people are under the impression that estate planning is not for them because they think it’s only for the rich. Yet, neglecting to plan for your estate is a mistake—don’t let the stereotype scare you.
Estate planning is the process of transferring your assets to others after you pass away.
The assets involved in estate planning include cash in bank accounts, stocks and bonds in investment accounts, real estate, and other items such as your car, artwork, jewelry, and your baseball card collection. Estate planning doesn’t just focus on financial assets, it also focuses on the transfer and care for children. As you will see throughout this chapter, successful estate planning offers so much more than simply transferring your assets at death. Your commitment to your family and your loved ones should last as long as they live—not only as long as you live.
Estate planning answers the following questions:
- Who do I want to take care of my children?
- At what age should my children have control over their inheritance?
- Who should get my great-grandmother’s antique wedding ring?
- Who should make decisions for me if I’m unable to do so?
- Who should have access to my checking account if I leave the country?
- Which charity should receive my investment account?
- Do I want to have a traditional funeral?
- Do I want to be kept on life-support indefinitely?
What’s the purpose of estate planning?
Estate planning has three important purposes:
1) It provides for your loved ones.
This is the most important reason for estate planning. If you have a spouse and/or children, continuation planning gives you the chance to provide for them after you pass away. I work hard to provide for my family—financially, emotionally, and spiritually. Estate planning will help me continue to provide for my family after I pass away. It’s not just about financial support. It is about making sure your loved ones are looked after and about helping them accomplish their dreams. Even if you don’t have a spouse or children, would you like to help a niece, nephew, brother, sister, mother, father, or friend?
Estate planning puts you in the driver’s seat. You’ve worked hard for the money and things that you have. Planning gives you control over the benefits of your hard work. There are simple and quick things you can do today that will protect your family when you or a loved one passes away. This chapter will guide you through the minimum in estate planning that you will need to provide for your loved ones’ future.
2) It helps you achieve your goals.
If you have charitable goals, there is no reason that your death should put a stop to your achievement. For example, one of my IMPACT Goals in life is to help as many people as possible reach their own goals. Another goal is to support the mission of my church. I’m also passionate about animal welfare. While all of these are goals I try to achieve today, my devotion to these causes doesn’t have to stop when I pass away. With some planning, these goals can continue to be pursued and achieved.
3)It helps you give as much as possible to your family or charity.
Depending on the size of your estate, your death may bring an unwelcome relative wanting his fair share of your estate—Uncle Sam. This is one of the first things most people think of when they think of estate planning—reducing their estate tax. I believe that taxes are the price of life in a civilized society, but I also strongly believe that I shouldn’t pay any more tax than is legally necessary.
Billions of dollars are paid in estate tax every year that could have been easily avoided. We go to great lengths to reduce our taxes. We contribute to 401(k)s and IRAs, donate to charities, and keep detailed records. I used to live on the Washington-Oregon border. Because Oregon doesn’t have a state sales tax, I knew people who would drive 30 minutes to Oregon to save less than $10 in sales tax.
We’ll drive across town to save a buck or two, but our lack of careful estate planning may cost our loved ones anywhere from thousands of dollars on up in easily avoidable estate taxes. With just a little bit of planning, the vast majority of the population shouldn’t have to pay any estate tax. If you’re fortunate enough to have enough wealth where estate tax is unavoidable, there are more advanced strategies that can dramatically reduce Uncle Sam’s cut. Again, why pay more tax than is legally necessary?
The proceeding blog post is an excerpt from The Six-Day Financial Makeover: Transform Your Financial Life in Less Than a Week!, available now on Amazon.
About the Independent Financial Advisor
Robert Pagliarini, PhD, CFP®, EA has helped clients across the United States manage, grow, and preserve their wealth for the past 25 years. His goal is to provide comprehensive financial, investment, and tax advice in a way that was honest and ethical. In addition, he is a CFP® Board Ambassador, one of only 50 in the country, and a real fiduciary. In his spare time, he writes personal finance books, finance articles for Forbes and develops email and video financial courses to help educate others. With decades of experience as a financial advisor, the media often calls on him for his expertise. Contact Robert today to learn more about his financial planning services.