Many statistics suggest that 6 out of 10 Canadians do not have a retirement plan. What's scarier is that even fewer have estate plans. When you think about estate planning, what comes to mind? For most people, estate planning is about what happens when you die. Where does your money go? How can you minimize taxes? How can you keep more by paying less?
There's an old saying that says, “There are only two certainties in life: death and taxes”. For many people, this probably captures the essence of estate planning and why estate planning is important.
There's no question that estate planning has a lot to do with money, taxes and death. At the same time, estate planning is about so much more. Let's look at some of the common misconceptions of estate planning.
It's for the wealthy
The first misconception is that you have to be wealthy to do some estate planning. Whether you have $100,000 or $100,000,000, your money needs to go somewhere. Whether you make $30,000 per year or $300,000, you have to pay some tax. If you have family, any amount of money can become a source of problems and can cause conflicts within perfectly normal families. Most people need a Will no matter how small or big the estate.
It's for the old
The second misconception about estate planning is that many people think estate planning only happen when you are older. Typically, the older you get, the more you start to think about estate planning because age puts you closer to the reality of death. However, you don't have to be old to die. Unfortunately for many, death happens too early. For that reason, estate planning should start sooner than later. Planning should happen when you get married and then becomes more important once you have children. The minute you have people that depend on you is the moment you need to start thinking about what happens if you die. How will the people you love (your family) carry on for the rest of their lives?
You have to die
Estate planning is not just about death and taxes. In fact, estate planning is also about protecting you and your family against dependency too. Estate planning is not just deciding what happens when you die. It is also about taking care of you if you become incapacitated by senility or illness whether by old age or a disabling accident. This is why you need an Enduring Power of Attorney (EPA) and a Personal Directives (sometimes called a Health Care Directive) to make sure someone is in place to take care of your financial affairs and your health care if you can't do it yourself. With an aging population, more and more families will be faced with issues of caring for older dependents like parents or spouses. Good estate planning will help families cope in these situations.
Estate planning is about me
Estate planning is all about family. The minute you have family to worry about is the minute you start to think about estate planning. This means making sure the people you love get as much of your estate as possible and in the most helpful way possible. As most people have learned, simply handing over money does not equate with love nor does it equate with taking care of someone. Good estate planning is about keeping families together especially during the difficult emotional period of grieving.
Unfortunately, it does not take much to ignite family feuds. Too often, big fights are caused by little things like incomplete intentions, out-of-date instructions, feelings of inequality, and meaningful possessions that can't be divided. It is amazing how a little planning, thought and action can help avoid family conflicts.
The bottom line is estate planning is essential so don't wait to get started.
Jim Yih is the author of Smart Tips for Estate Planning. Check out this book for more information on estate planning
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Consequences of Dying without a will
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