The biggest of all estate planning mistakes is failing to have one. The second biggest is to start planning too late. Merril Lynch Wealth Management found that a staggering 72% of Americans aged 55 or older did not have all the recommended estate planning documents in place. 45% had not even made a will.
A clear estate plan avoids your family fighting over money
As a parent, perhaps the worst scenario of all is not that your children struggle for money but that they fight over money, forever damaging their relationship. Yet this has happened to many families where there is no clear estate plan in place. Siblings argue over who gets what and what you would have wanted. When you are alive, you have the opportunity to decide and document who gets what. You have the chance to tell your children why you have made specific decisions.
An early estate plan allows you to maximize tax-free transfer allowances
Assets transferred on death may be subject to estate taxes. Although the threshold is currently high, at over $11 million, there are plans to reduce it significantly. There are methods of passing assets to your children tax-free while you are still alive. The earlier you start to do so, the better you can take advantage of the tax-free allowances.
An estate plan can help your family receive your assets quicker
If you die without an estate plan in place, your estate will pass through probate. This can take a considerable amount of time while the court decides how to distribute your estate. A carefully designed estate plan can help some assets avoid probate and can get them into your children’s hands quicker. It is always better to create an estate plan early, so that you are always prepared for the future.