estate planning

While death and
taxes are the two certainties in life, no one ever expects their child to die
before themselves. Yet life comes in different flavors.

Here is a great
example I always consider.

A Sample Scenario

Mrs. Lee’s 40-year-old
son, Jason, was diagnosed
with stage four cancer of the blood. Even with a bone marrow transplant from
his older brother, Jason died within six months of being diagnosed.

It was swift, and it left his family reeling:
not only from grief and tragic sense of loss but confusion and uncertainty as
to his wishes for his own estate.

Jason’s girlfriend had moved in with him less
than a year prior to his diagnosis. Two weeks before his death, she asked him
if they could get married, which they did.

Mrs. Lee was very concerned as to the motives
behind Jason’s girlfriend’s request.

Jason died without having made a will, a
situation known as intestate. If you were to die intestate that would make
your estate subject to the intestacy laws of the state you were living in. The
state then gets to decide what to do with your property, your bank accounts,
and everything you own.

In the case of Jason, if he had died before
his marriage, all his assets would have gone to his next of kin. Since he had
no children, his mother and father were his closest relatives.

Getting married just before his death,
however, made his new wife his next of kin. She is now entitled to the lion’s
share of Jason’s assets.

Was that what he
really wanted?

Why You Need an Estate Plan

Even in our day and age many people still die
without having written their will. But an estate plan can save a lot of grief
to those you leave behind.

An estate plan has these 7 benefits:

Efficiently Provides
Income for Any Dependents or Beneficiaries

If your spouse, dependent children, or aged parents relied on your income while you were alive, how will you provide for them when you’re gone? What about providing for a disabled adult child, if you had one?

You will want to set things up well to provide
for them through a stream of income or a lump sum payment.

Minimizes Disputes
Among Family Members

A will and a good estate plan should
communicate your wishes for how you would like your estate to be divided. This
does not necessarily negate disputes and ill feelings, but it should minimize misunderstandings.

Can Impact Your
Taxes – While Alive and Upon Death

Having set a good estate plan will leave more money to your beneficiaries after taxes. From rollovers of various tax-sheltered accounts to various trusts and charitable donations, there are numerous strategies you can put in place while you’re alive to minimize the amount of taxes you may have to pay upon your death.

Ensures Sufficient
Liquidity in Your Estate

You can set up your estate plan to pay for outstanding taxes and fees without your beneficiaries having to come up with the cash from their own pockets or being forced to sell parts of the estate quickly.

Minimizes Costly
Government Involvement

Dying without a will means the government may
have to step in and manage your estate. And it will cost your estate money to
have the government administer it.

Maintains the
Viability of Your Business

If you are a business owner, you must make
plans for the succession of your business, if that is your intent, and particularly
if you are a key part of the business.

You should groom a successor and maybe even
affect an estate freeze to pass future growth in the company to your
beneficiaries in order to minimize taxation upon your death.

Provides Peace of

Death is a very stressful and painful time for
loved ones left behind. It is not fair to leave them with an estate that was
not well planned. They may end up making poor decisions as a result of having
to deal with the estate at the same time as grieve your demise.

It does not matter how old you are, every
adult needs an estate plan put in place.

The fundamental questions you should ask
yourself is: How do I want to be remembered when I am gone, and who do I want
to share my legacy with?

A good resource in preparing your estate is Blake Johnson’s You Can’t Take It With You: The Top 15 Estate Planning Questions Answered in Plain English.” Blake Johnson happens to be an estate lawyer and he cuts through the jargon to help you plan your estate efficiently.

If you live in Canada, an excellent book I read early in my career is You Can’t Take It With You: The Common-Sense Guide to Estate Planning for Canadians.

Part 2 of this series
will cover what makes for a good estate plan.

Who will administer your estate when you’re
gone? Do you have dependents that you need to provide for? Have you thought
about creating an estate plan? Do you think that’s an important step to make?
Please share your thoughts and stories in the comments below.