(Forbes) -- While you may think that only the ultra-wealthy need an estate plan, anyone—regardless of age, marital status or net worth—can benefit from having a plan in place if the unexpected happens. Still, more than half of American adults—and 78% of millennials—lack basic estate planning documents like a will or living trust, according to the AARP.
It’s not surprising that younger adults tend to put estate planning on the back burner.
However, even if you don’t have children or many assets yet, you can benefit from going through the process now.
Here are six reasons why you should have an estate plan at any stage of life:
1. To Plan for Your Own Needs
An important step in the estate planning process is determining who will make decisions on your behalf if you’re unable to do so yourself. If you become incapacitated—or unreachable due to travel or other circumstances—a living or revocable trust will hold assets for your benefit while you’re alive and name the people you wish to receive your property when you die.
Additionally, naming a durable power of attorney to act on your behalf on financial and legal matters if you become physically or mentally disabled can help ensure that these decisions are made in your best interest. If you’re unable to make medical decisions for yourself, having a healthcare proxy, agent or power of attorney, HIPAA release and living will can help make sure that you receive the care you need and desire.
2. To Choose How You Dispose of Your Wealth
The most basic document of most estate plans is a will, which names an executor or personal representative who is responsible for the administration of your estate after you die and distributes property as you direct. If you have minor children, you can name guardians to oversee their care in your will. A revocable trust or personal property memorandum may also be helpful to supplement your will.
Certain assets such as life insurance, retirement accounts and annuities require you to name beneficiaries and therefore don’t need to be included in a will. However, these assets are often overlooked, so it’s important to coordinate their distribution with your other property.
3. To Minimize Transfer Taxes
Maximizing the wealth you transfer to your beneficiaries (and minimizing transfer taxes) can be an important component of the estate planning process. The Tax Cuts and Jobs Act of 2017 expanded the amount that individuals may give away at death—or during life—without triggering transfer taxes. The new law offers several advantages, including an increased exemption amount until 2026 and portability, which means spouses can share one another’s exemption. You can make annual tax-free gifts up to $15,000 in 2019 (and double this amount for married couples). Additionally, you can pay medical and educational expenses for someone else without incurring the gift tax.
4. To Incorporate Philanthropic Planning
If you have philanthropic goals—whether from a legacy, personal fulfillment, generational connection or tax-planning perspective—an estate plan can help make sure your objectives are met. Going through the planning process allows you to choose a charitable cause that’s important to you, select the assets you wish to give and determine the best way to make your gift.
5. To Protect Family Wealth
Many wealth transfer strategies also have wealth protection benefits, which can be an important consideration for affluent families. Asset ownership, insurance, limited liability entities, irrevocable trusts and asset protection trusts are all methods designed to protect your assets from creditors in the event of frivolous law suits and claims. A wealth advisor or estate planning attorney can help you determine which of these options is appropriate for your circumstances.
6. To Prepare Future Generations to Receive Wealth
Finally, preparing the rising generation to receive wealth can be very helpful in preserving family wealth in the long term. Developing an estate plan is often a good opportunity to establish wealth planning goals, facilitate conversations about what wealth means to your family, and educate adult children about financial concepts and ways they can become involved in creating and sustaining the family legacy.
Estate planning can be a daunting task, especially if you’re starting from scratch. If you’re unsure where to begin, working with a trusted advisor or estate planning attorney can help you develop the documents you need to give you peace of mind about your financial affairs.
