Estate Planning – The Important of Having A Plan

Estate planning gives people a charge somewhat similar to their teeth cleaning appointment at the dentist. It isn’t much to get excited about, but it is critical to your overall health or, in this case, your financial health. Going without an estate plan is the equivalent of taking all your hard earned money, tossing it in the sink with some water and letting the garbage disposal have a go at it. What is an estate plan? At the risk of ripping off a line from the Matrix movie, it is about having control. The machines are not the threat this time. Instead, it is your friends at the government. With an estate plan, you control how your assets are distributed on your passing, the amount of taxes paid on them and other incidentals. Without an estate plan, the federal and state governments control such issues and you should know that such a development is not a good thing.

Let’s look at a simple situation as an example. You are a hard working middle class American. You have a spouse and three kids. A drunk driver hits you and your spouse one night and both of you pass away. What happens to your kids? If you have an estate plan with a will and/or trust in it, you will have detailed what should happen to them in the sense of who should take care of them and so on. You will also have purchased life insurance to provide money for their care. Now, what happens if you don’t have an estate plan? It becomes a bit like a bad movie. The children will go into the social services system while a judge tries to figure out what to do with them. The result will differ depending on the state you live in. They might end up with your parents, sisters or brothers. They might not. Even then, what funds will be available for taking care of them? Did you buy life insurance? Is there any equity in your assets? How much of the equity will be lost with the soon to be enacted 55 percent estate tax? As you can see, it can get very ugly, very quickly. An estate plan gives you control of the situation should you pass away. If you don’t have one in place, you need to take action. We all hope to live to the age of 100 or so, but that rarely seems to happen for whatever reason. Hope for the best, but prepare for the worst. Barry Milton writes about estate planning and other financial planning subjects for UFCAmerica.com.

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