How Poor Estate Planning Can Hurt Your Child’s Future
Did you know that failing to prepare an estate plan can not only harm your future, but it can also negatively impact your children? Estate planning involves legally binding arrangements regarding health care and financial considerations during a person’s lifetime, as well as the transfer of authority and wealth when a person becomes incapacitated or dies.
An effective plan could ensure that all of an estate holder’s wishes are followed. Too often, however, people allow their future, and their family’s future, to be at risk. In fact, about 60 percent of adults in the U.S. lack basic estate planning documents. Let us discuss why that can be a recipe for disaster.
- Debt. If you die with debts, and many people do, then creditors and debt collectors could pursue payment from assets that you may be planning to leave your children. Furthermore, your children could find themselves in a position of fending off creditors when an estate plan could have alleviated that stress. One solution would be to dedicate a portion of a life insurance policy for future debt obligations.
- Taxes. Taxes can be a core concern for every estate, and people commonly fail to mitigate exposure. Even if federal and state estate taxes do not apply, your heirs may not be off the hook. Whether leaving behind tax-deferred retirement accounts like an IRA or 401k, real property that may be subject to capital gains taxes, or other vulnerable asset items, a creative plan could spare your children onerous tax debts.
- Long-term care. Even the most committed family caregivers may reach a point when they can no longer provide the care that an elder parent needs. Often, the elder adult transitions to a long-term care setting. Failure to plan, however, can create huge financial burdens on adult children. Senior care can be expensive, and a well-crafted plan can help build financial resources in anticipation of future long-term care costs.
- Legacy. When seniors have not planned for long-term care expenses, or if they have left behind tax burdens and debt-stricken assets, their children and their grandchildren’s lives could be derailed. When elder adults pass, their adult children may often be in the stage of life where they have started their own families. They may have young children, have recently purchased a first home, or maybe they want to save for their children’s education. Failing to take the necessary steps to secure your estate plan could impact two generations.
Almost everyone can benefit from a proper estate plan, including your loved ones. Contact our office for help navigating these issues.