Estate planning is a usually overlooked part of financial planning. It’s understandable that it’s difficult to answer end-of-life questions such as “What happens to my assets and my loved ones when I die?” or “Which relative will get which part of my estate?” 

With this, it’s not surprising that many Australians don’t even have a will, and even fewer have an estate plan. But in today’s society, estate planning has become even more important and  involves more than having a simple will. There are plenty of horror stories you will read online about how relationships broke down over fights over a departed relative’s estate or how assets were mishandled that eventually lead to bankruptcy and legal court battles (which could get pretty ugly). 

So, while estate planning might seem like a morbid and gloomy task, don’t take a rain check on it. Here are the top reasons why you should tackle your estate planning as early as you can. 

What is estate planning?

An estate consists of all the property a person owns or controls. Your estate can include your house, car, jewelry, stocks, bank accounts, life insurance and other personal interests. So, while some estates are worth a lot more than others, it’s almost impossible to claim that you don’t have one. 

Estate planning entails developing a strategy on how your assets and investments will be managed when you pass away. It will provide details on who will get what, as well as the process involved in getting them. It also states how you want people to handle key health and financial decisions if you are unable to do so for yourself during your lifetime.

The main goal of estate planning is to provide peace of mind for you and your loved ones when you pass away, ensuring that your assets are distributed among your beneficiaries in the most simple and effective way. To learn more about what estate planning is, read here. 

Why is it important?

While there are several reasons why people should take time to do their estate planning, here are the top reasons why it should be on top of your financial planning checklist: 

1. Prevents family disputes
Your family or loved ones may get along well, but family squabbles over assets happen more often than you think. A breakdown of family relations is an all too frequent consequence of not planning what happens to your estate. 

If a family member tries to cash grab or hoard all the treasured family heirlooms after you pass away, this can rile up your other relatives and result in them thinking they have been wronged.  This can lead to family members duking it out in court for years and things can often get ugly. Not to mention that this will result in irreparable damage to relationships (and cutting of familial ties in worst case scenarios). 

By having an estate plan to designate who inherits what, you and your family members can avoid a potential catastrophe by letting the court system decide what happens to your assets. 

2. Protects your minor children 

No one wants to think of the possibility of dying young, especially those who have young children. But what if it happens? What will happen to your children? Without a will in your estate plan, courts will decide not only who will get your assets, but also who will raise your children. 

If you have children, you need to be prepared. In the event that you die without a surviving spouse or partner to care for your minor children, an estate plan can provide instructions on who will take care of them and how they will receive money.This will specifically involve setting up a will, which is just a portion of estate planning. In your will, you will designate how any children under the age of 18 are taken care of, and what items in your estate are to be inherited by them when they come of age.

A good estate plan will also protect your heirs from recrimination. Meanwhile, a living will (if included in your estate planning) can also help them make difficult and painful health decisions during a parent’s end of life. 

3. Avoids the time and expense of probate court

For most people, avoiding problems during the probate process is a good reason to create an estate plan. A probate is the process of determining the validity of an individual’s will and placing a value on their assets, paying their final bills and taxes, and distributing the rest to their beneficiaries. When your estate goes through probate, some of your money will go into paying costly court fees, administrative fees, attorney’s fees and the like.

Yes, probate can be a nightmare. There are numerous (and infamous) probate horror stories that are covered by the media or are heard from neighbors, colleagues or friends. If the heirs of an estate are not on good terms, all bets are off. Even then, the probate process is unavoidable.  

A well-crafted trust in your estate plan will help you through probate court, which is considered to be the most annoying and tedious part of the entire process. Because using a trust is easy and convenient, more people are doing an end-run around the inconveniences of probate and are setting up their assets in this manner. To learn more about what a probate is, read here. 

4. Protects your assets

Asset protection has become a top reason why many people are prioritising their estate plan. It helps guard against dissipation of your assets due to spendthrift tendencies, age, mental health, drug addictions, gambling or other vulnerabilities of a beneficiary. It also ensures that your money stays in the family. Structured completely, a set-up trust can keep a financially irresponsible child from mindlessly spending the money you saved to provide a good life for all of your heirs. It also keeps money in the family. For example, if a spouse tries to get a slice that is not rightfully theirs. 

A good estate plan can also help protect your assets from unforeseen creditors. It can help safeguard your estate in the event of a lawsuit in the future. This is particularly helpful if you work in an industry that often deals with litigations, such as commercial or residential properties or the medical field. While this measure will require you to relinquish a bit of control over your assets, it is a good level of protection if creditors come forward and attempt to get their hands on a part of your estate. 

5.Provides guidance   

Your family and loved ones are at their most vulnerable after your death. An estate plan can give specific and detailed instructions where everything that you owned is itemised and all your wishes are laid out. It will take the tedious decision making, guesswork and search for documents out of the equation in the period following your death, saving your loved ones a lot of frustration and confusion.  

Think of the peace of mind you can provide your loved ones if you have your affairs in order. Additionally, think of the stress it will save you at critical end-of-life moments. 

Bottom line

Understandably, estate planning can be a complex and emotional task. But the earlier that you get started, the more prepared you and your loved ones will be to deal with a variety of difficult situations. 

To learn more about estate planning, explore nestegg now.