Top 3 Emotional Reasons Why Estate Planning is Important
Most wealthy individuals think about increasing their wealth during their lifetime, but spend little time thinking about what will happen to their assets after they are gone or when they are no longer able to make decisions themselves. Estate planning is a task that many of us put off until later in life, but no matter your age or wealth, having an estate plan is among the most important things you can do for yourself and for your loved ones.
Without an estate plan, you have little control over what will happen to the assets that you have worked so hard to accumulate. This article points out the top 3 emotional reasons why estate planning is important, so that you can see the blessings estate planning can bring.
What Is Estate Planning?
Your estate is everything you own, including your investment portfolio. Estate planning is making a plan in advance to arrange for an orderly and secure transfer of your estate to the intended people or organizations after your death. It leaves behind a written record of your wishes and intentions so that it gives you a say in how your estate will be distributed.
Estate planning can also allow you to have a say in how you want people to handle your health and financial affairs if you are no longer able to make decisions yourself during your lifetime. Asides from financial reasons, below are top 3 emotional reasons why estate planning is important.
1. Ensure Your Assets Go to the Intended People
The main component of estate planning is to ensure that your assets go to the intended people. Without an estate plan, the courts will often decide who gets your assets. This is a process that can take years with significant fees and can get ugly because there is a chance your wealth will be passed down to unintended beneficiaries or in unintended amounts.
For instance, Ontario’s intestacy laws, which apply when an individual passes away without a valid will, direct that in cases where a spouse and one descendant (child) survive the deceased with an estate worth more than $350,000, the spouse would receive the first $350,000 with the remainder split between the spouse and the child. Given the complexity of modern family dynamics and the nature of wealth involved, it is almost always the case that standard intestacy laws will not reflect one’s true intentions so preparing a will may very well be an important consideration.
An estate planning lawyer can help you ensure that your wealth goes to your intended inheritors. If you want to choose who will inherit and how much, you will need to do some estate planning.
2. Avoid Family Disputes
Many family disputes occur during the distribution of wealth. Estate planning can help you stop fights before they start and minimize the chance of family strife and legal tie-ups that may end up in court.
Many Canadians are unware that a probated will is a public document. In Ontario, copies of wills and probate applications can be obtained where the probate application was filed with an Ontario court, potentially making sensitive information such as net worth, assets, and the value of private company interests available and accessible on request. This information can serve to create conflict, particularly if it comes as a surprise to certain family members or close associates.
The use of a trust may mitigate the issue: the contents, beneficiaries and trust agreement of a trust set up prior to death, to which assets are transferred, often remain private. The planning, set-up and administration of this sort of structure does come at a cost , so you may wish to first arrange a family meeting and invite those that will be involved in your legacy for an open discussion around your plans and long-term intentions. If this is not feasible, a lawyer specializing in estates may be able to help you brainstorm a solution that minimizes the potential for long-term conflicts while keeping your intentions intact, whether using a trust or otherwise.
3. Long-Term Peace of Mind
At the end of the day, after all that you have worked hard for, knowing that your vision for your legacy has been thoughtfully planned out is likely very important. For those that have accumulated wealth beyond their personal needs, having a lasting impact on their families and communities for generations to come often becomes a prominent consideration, even if they cannot personally execute their plan or observe its progress.
Just as uncertainty about one’s retirement is generally grounds to go through a retirement planning process, the desire to be confident in your legacy as a summation of your life’s work, whether motivated by family, community, or a cause, certainly merits the effort and time to reflect on your values and map out just how to manifest the enduring impact that you have in mind.
The Bottom Line
An estate plan can help you feel more confident about life, knowing that the legacy you leave behind is the one you intended.
This content is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this content should consult with his or her financial partner or advisor.