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Why Estate Planning Is So Important

July 15, 2020 | Andrew Swain Andrew Swain

What is estate planning and what are the costs? If you’re a homeowner, here’s why you should consider an estate plan.

Estate planning is one of those essential things nobody thinks about doing. It’s also a sensitive subject. Most people struggle with anything that reminds us of our mortality. More than 40 percent of Americans have no estate plan in place. However, planning for what happens with your personal property, including your home, after you’re gone is important. 

There are many components to an estate plan. You may want to designate who in your family gets certain heirlooms or jewelry. If there’s antique furniture or original pieces of art, you want to make certain they go to the right people. Your estate is technically anything you own yourself or with someone else. This includes real estate, stocks, and bank accounts. Even your pets are part of your estate. As you think about all the smaller items to designate in an estate plan, don’t forget about the big stuff, namely your house.  

Number of Americans with a will by age

Writing a Will

The paperwork of estate planning

There are a variety of types of paperwork involved with estate planning. What you’ll need varies by your current situation, assets, and level of wealth. Most people begin estate planning by creating a will, trust, or both. These are important documents you can work with a professional to complete, or draft through an online service.

While many think about estate planning in relation to inheritance, some documents come into play while you’re still alive. You’ll want to include information on who can make your banking or medical decisions if you’re incapacitated. You should also have a living will and a HIPAA waiver that designates who can access your medical records.

Once you’ve completed your estate plan, regardless of what documents are within, make sure both you and the people mentioned have copies. You should also maintain a secure, digital copy just in case. Often, if you get professional help creating your estate plan, the lawyer will keep a copy too. Share your attorney’s contact information so others have it.

Estate planning is much bigger than protecting your home. The more you’re able to plan, the better.

Downturns are a good time for estate planning

It’s unpleasant to think about, but times of uncertainty and economic struggle tend to increase the likelihood of tragedy. A world dealing with COVID-19 offers ample evidence. Even if a downturn has altered your financial stability, it’s still one of the best times for estate planning.

A recession reminds you of how hard things can get, and how badly you want to protect your loved ones from difficult times. Thinking long term helps you get through it. Even if your property value decreases and you feel like offering it as an inheritance isn’t worthwhile, remember this is only temporary. What will the house be worth in five, 10, or 15 years? Thinking about the highs that usually follow economic lows provides a sense of clarity. Passing a home onto your heirs is a valuable gift for future generations.

Take advantage of refinancing

Economic downturns also offer benefits you can take advantage of that can help those inheriting your home. During tough times, interest rates often go down. By refinancing your home with lower mortgage rates, your estate plan passes down a lighter burden to your heirs. They’ll owe the bank less when they take possession of the house. 

Avoid the costs of probate

It’s an unfortunate circumstance to inherit a home only for the bank to take it before you can. Without proper estate planning, this situation happens. A home without an estate plan gets inherited through probate. This comes with a cost of around seven percent of the home’s worth, in addition to court fees. That’s a hefty cost that can lead to repossession rather than inheritance. 

Probate also takes a long time. Even if the fees are affordable, there is a delay in inheritance. We’re talking years, in many cases. While waiting, you still have to make mortgage payments, pay property taxes, and possibly spend more; all without technically owning the home. The best way to prevent this awkward situation from happening is with proper estate planning.

Read more: Why You Should Avoid Probate

Estate planning documents

Keep assets in the family

Avoiding the cost of probate is just one way estate planning ensures your assets stay in your family. It also guarantees the people you want to have your assets get them. Without an estate plan, pre-established laws dictate the distribution of your assets. This might require selling everything off, leaving beneficiaries with only cash.

Cash in hand is nice, but if you’re the first person in your family to own a home, keeping it in the family is significant. You’re giving the next generation a leg up by providing them a property they might not have been able to afford themselves. 

Being able to keep your home through all life’s ups and downs is something to celebrate. Estate planning can ensure it stays in the family even after you’re gone.

See also: What to Do With an Inherited House

Inheriting a house

Inheriting a house comes with its own set of complications for those taking ownership. Crafting an estate plan can help minimize those issues and make the transition easier for everyone. It helps prevent family conflict. It ensures the proper execution of your wishes. You can also give the person inheriting your home time to educate themselves on what inheritance means, sorting out the taxes they may have to pay.

If you’ve inherited property through an estate plan and would like to sell, but don’t have time to renovate or update, contact Sundae. We can help you explore your off-market options and make sure you get the best price possible for the home.

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