Many people fail to realize the importance of early and active estate planning. Some put it off thinking they are too young to need it. Others have estate plans that only include a basic will, with no thought toward what could happen between now and the time they die — or their plans are hopelessly outdated.
Rather than think about an estate plan as a passive document that you make then file away, think about estate planning as an active, ongoing process.
Active estate planning can benefit your family
Passive estate planning would be writing a will so that when you die, your assets pass to your family. However, if you do that, the IRS may take a substantial chunk of what you leave behind in taxes.
If you think about estate planning as an active, ongoing process, you can find ways to reduce the tax payable on the transfer of your assets. For example, under current regulations, you can pass $15,000 per year to anyone you wish as a tax-free gift. So you could gradually move your assets to your family, year by year, thus reducing the tax you would pay if you waited until you die.
Tax laws change, so that is another reason to view estate planning as an active process. If you do not adapt to rule changes, you could miss opportunities.
You could need your estate plan while you are still young
Let’s imagine you are knocked down when crossing the road and left in a critical condition. What would you want to happen? Would you like a blood transfusion, or is that against your religion? Would you want to be resuscitated at the risk of being left in a vegetative state? You can specify all those decisions in an estate plan or designate a health care power of attorney to decide for you.
The more you understand about estate planning, the better yours will serve you and your family in the future, no matter what may happen. Don’t hesitate to get your estate plans in place.