Trust & Estate

The Importance of Estate Planning: How to Protect Your Assets and Loved Ones

The Importance of Estate Planning: How to Protect Your Assets and Loved Ones
December 20, 2023

Estate planning is one of the most important things you can do to provide for your family's future, no matter your age, health status, or net worth. A comprehensive estate plan allows you to choose who will inherit your assets, who will care for any minor children you have, and who will handle your affairs if you become incapacitated. It also helps minimize taxes and probate fees to preserve more of your estate for your heirs. Here's an overview of key aspects of estate planning and how it can help protect your assets and loved ones.

Protecting Your Assets and Loved Ones From Potential Risks

A primary goal of estate planning is safeguarding your hard-earned assets for your loved ones. Without clear plans in place, your estate could get tied up in the court supervised probate process. Probate proceedings can drag on for months or even years, and the court and legal fees can consume as much as 5-7% of an estate's total value.

Estate planning strategies like living trusts allow your assets to transfer seamlessly to beneficiaries upon your passing without court interference. This helps ensure more of your estate goes to your intended heirs rather than paying legal expenses. Proper planning can also help shield assets from creditors, bankruptcy, lawsuits, divorces, or other financial risks during your lifetime.1

Quick Overview

An estate plan allows you to choose who will inherit your assets and care for any minor children upon your passing. It also helps minimize taxes to leave more to your beneficiaries. Key estate planning documents include a will, living trust, power of attorney, healthcare directive, and beneficiary designations.

Avoiding Probate and Minimizing Estate Taxes

In addition to preserving more wealth for heirs by avoiding probate, estate planning aims to reduce tax burdens on your estate. This helps maximize what you can leave behind for loved ones and causes you care about.

Strategies like gifting assets through annual exclusion gifts, establishing irrevocable trusts, family limited partnerships, and more can help slash potential estate taxes. Proper structuring of wills and trusts can also help assets pass to heirs in a tax-efficient manner. 23

Will and Trust: Cornerstones of Estate Planning

Wills and trusts are centerpieces of most estate plans. A legally valid will lets you determine how your possessions and assets should be distributed when you pass away.

You can name specific people or causes to receive certain property. A will also allows you to designate guardians for any minor children you have.

Trusts provide additional control and flexibility. Different types of trusts let you tailor asset distribution details for heirs based on their needs, values, life stage, and more. Trusts also avoid probate and may offer enhanced tax minimization strategies. 4

Healthcare and Financial Directives

An estate plan should cover more than just your money and property. It’s also vital for making decisions about your healthcare and handling finances if you become incapacitated.

Powers of attorney let you appoint someone you trust to manage financial or healthcare choices if you’re unable to do so yourself. A living will provides specific written instructions for end-of-life medical treatments you may or may not want to receive.

Covering these bases provides you and loved ones with peace of mind. 5

Legacy Planning and Charitable Giving

For many people, estate planning isn’t just about distributing assets to heirs. It’s also an opportunity to support charitable causes you care about through legacy planning.

You can designate a portion of your estate or specific assets to go to non-profit organizations or causes after your passing. This creates a lasting legacy aligned with your values. Estate planning tools like charitable trusts and donor advised funds provide tax-efficient ways to integrate charitable giving into your plans.

Guardianship for Minor Children

If you have young children, determining guardianship is a crucial element of estate planning. A will lets you designate short-term guardians to care for kids if you and your spouse both pass away. You can name a different individual as the permanent guardian in the will.

Without clear guardianship plans, the court will decide who takes custody of your children. Thoughtfully choosing guardians yourself helps ensure your children are cared for by people who share your values and priorities. 6

Regular Review and Updates

Life changes like marriage, divorce, new children, moving, or changes in financial status all call for revisiting your estate plan. You'll want to update documents and designations to reflect your current circumstances and wishes.

It's generally wise to review your estate plan every 3-5 years even without major life events. Tax laws, asset values, and relationships evolve, so keeping your plan up to date is essential. 7

Professional Guidance and Legal Support

While there's information publicly available about estate planning, legal and financial guidance is highly recommended. The laws involved can be complex, so working with an experienced estate planning attorney provides confidence your documents follow regulations and your wishes can be legally enforced.

Financial professionals can also advise you on aspects like minimizing taxes, setting up trusts, integrating estate plans with your investment portfolio, and more. Their input can help to ensure your plan aligns with your overall financial picture and retirement goals. 8

Get Started With Savvy Today!

At Savvy, our team of seasoned financial  provide customized guidance at every step of the estate planning process. We help craft plans tailored to your unique family dynamics, assets, financial goals, values and more. Our tech-enabled platform also streamlines implementation and helps keep your plan updated over time.

Contact us today for a complimentary consultation to discuss your estate planning needs. We’re here to provide the clarity, confidence and convenience that comes from having a thoughtful plan in place to protect your hard-earned wealth and the wellbeing of those you care for most.