There is a common misconception that estate planning is only useful for those with extraordinary wealth or extremely complicated financial situations. While it’s certainly true that estate planning is critical in both of those scenarios, that does not mean that an estate plan is only for the rich and famous.
In fact, nearly every imaginable family or financial environment naturally lends itself to estate planning. To that point, estate planning involves far more than just deciding who gets your assets upon your passing. Instead, a good estate plan that is appropriate to your particular financial circumstances and goals will provide you control over your assets, even after your passing.
Control from Beyond
Exerting control over your hard-earned assets after you pass away isn’t so much about controlling those that inherit those assets but, rather, more about your money being used in a manner you deem responsible. Of course, more often than not money is transferred to heirs without strings attached and can be used as those heirs see fit. However, there are times and circumstances that call for control mechanisms that can only be made possible through an effective estate plan.
For example, assume there is a grandmother that absolutely relishes seeing her grandchildren grow and flourish. Given the complicated society we live in, however, at least one of those grandchildren will likely have some sort of issue that is of a concern to their grandmother – perhaps legal troubles or even substance abuse.
While that grandmother would like nothing more than to provide a portion of her assets to each of her grandchildren upon her passing, she’s rightfully hesitant to give free reign over a substantial amount of money to a grandchild that struggles with substance abuse, strictly out of concern for their well-being.
For that reason, the grandmother can include specific language within her estate plan – specifically her living trust – that allows her grandchild with substance abuse issues in their past to inherit a certain amount of money over a certain amount of years as long as they are able to pass a random drug test every year. While some might see this type of restriction as extreme, it provides peace of mind to the grandmother that can only be provided by an effective estate plan.
Aside from control mechanisms, estate planning can also infuse tremendous tax efficiencies into an estate through a variety of different techniques. Historically speaking, the tax code has provided certain provisions to taxable estates that allow them to either defray, lower, or even eliminate estate taxes when used properly. Of course, relying on the knowledge and skill of a tax specialist and estate planning attorney can greatly improve your chances of making your estate as tax efficient as possible.
Estate planning also addresses factors other than assets and taxation. A comprehensive estate plan will also include medical directives, beneficiary designations, and other ancillary documents that can be extraordinarily important in your final moments. Remember, when a loved one passes away, things like money and account maintenance are often the last thing a family feels like dealing with. However, those are precisely the items that must be dealt with when someone passes away.
A comprehensive, well organized estate plan can greatly simplify and streamline the process to take a significant burden off your loved ones in the midst of their grief.
Jeremy Wallace is founder and chief investment officer at Wallace Hart Capital Management, an independent financial services firm committed to offering comprehensive advice and customized services. Jeremy has 20 years of experience in the financial industry and is passionate about helping clients preserve and enhance their wealth so they can pursue their passions. Jeremy graduated from Emory University with a degree in international economics and a certificate in financial planning. Outside of the office, Jeremy spends most of his free time with his wife, Julie, and their three children, Isabel, Lincoln, and Reid. He is an avid Chicago Cubs baseball fan, and he enjoys golfing with his wife and traveling with his family. Learn more about Jeremy by connecting with him on LinkedIn.