Despite the belief that Millennials are young and inexperienced, the oldest Millennials are 38 this year and well on their way to retirement. Quite a few Millennials have made it big in the last 20 years, using strategic investments, business ventures, and more to pave their paths toward millions.
What many Millennials lack, though, is a formal estate plan. Estate planning is not something that should begin just before retirement—it’s a crucial component of financial planning that you should start while you’re still young and earning money.
If you’re part of the wealthy group of Millennials that hasn’t considered what happens to your wealth (and health) when you reach your later years, now’s the time to start planning.
Why is Estate planning important?
Everyone can benefit from establishing an estate plan, but millionaire Millennials, in particular, will need one to ensure that the future of their wealth is secure.
You may have only just started to consider the idea of heirs and inheritances at this point of your life, but it’s inevitable that your heirs will need to handle your assets after you pass. A well-thought-out estate plan will ensure that the wealth you’ve worked hard to accumulate gets passed along according to your wishes.
Additionally, formulating an idea of what you want to happen with your estate later can help inform your financial decisions in the short term, so you continue to work toward your goals.
Estate planning: what does it cost?
The cost of your estate plan varies. It mostly depends upon the number of documents you require. The papers could be complex as well. For strategic estate planners, these documents are important tools. And yes, a good estate planning official would recommend a combination of these tools. He/she would also assist you in developing a strategy that works to make the tools work better and yield better results.
For instance, a family with an average income and small children needs security in the very first place. A will or a document that ensures that the wealth passes on smoothly in case of the sudden death of the parents is the primary requirement.
On the other hand, for a considerably affluent family, where the parents are well off enough, estate planning is essential. The concerned documents would ensure guardianship (as long as the children are too young). Not only so but also the financial security would be maximized at a very young age!
What is the difference between Will & Estate Planning?
The will is a legal document that only outlines how your assets would be passed on while you are no more. It can also appoint an executor, to carry out whatever was outlined in the will after you pass away!
Writing a will is way more simpler than estate planning. A will is a single tool, whereas an estate plan is not. The latter includes much more starting from wills to powers of attorney to advance directives, and so on.
Are estate planning fees taxable?
Talking about estate planning, this service is no longer tax deductible. Previously the IRS permitted deductions and exemptions for certain estate planning costs. However, the Tax Cuts and Jobs Act of 2017 altered this regulation.
Estate planning fees may once more be deducted from taxes in the future because these adjustments are up for renewal in 2025.
Aspects of estate planning to be considered
Estate planning for the wealthy is a little different from estate planning for the average American family. Where most people can get away with establishing a will and powers of attorney, millionaires will want to set up their finances with more complex trusts to minimize taxes and probate and maximize the money passed down to heirs.
Obviously, you should designate medical and financial powers of attorney so that your assets and medical decisions will be in the hands of someone you trust, just in case of an accident. However, your estate plan should also include consideration for some of the following.
Establish trusts: Trusts are the ideal way to handle the inheritance of large sums of money so your heirs don’t have to go through probate, and you can enact more control over where your assets go. If you already have a family or beneficiaries you know you will pass your wealth on to, you can establish trusts right away and set restrictions as necessary. If you’re unsure of the inheritances you want to leave, you still have the option of establishing a living, or revocable, trust, that you can amend over the years.
Tax strategies: One of the biggest components of your estate plan will need to be determining ways to minimize the amount of taxes your estate will owe after you die. One way you can start reducing these taxes now is by giving annual gifts, which are tax-exempt up to a certain amount. Having a plan in place for later in life is also ideal, so you can continue to monitor your asset growth and make tax adjustments as necessary.
Consider charitable donations: If there’s a charity you value and want to continue supporting after you pass away, you can set up a trust to place assets in to distribute after your passing. Charitable donations help reduce your estate value, further minimizing the taxes owed.
By discussing these concepts and more, you’ll be prepared to safeguard your wealth as it grows throughout your lifetime and later passes as much as possible along to your heirs.
Finally, where many Millennials are buried in student loan debt and may not be financially prepared for retirement and beyond, millionaire Millennials have specific, unique needs. This is why it’s extremely important to seek out a financial advisor in Los Angeles that understands both the Millennial generation and wealth management.
Once you have the initial conversation with your advisor, it’s a good idea to revisit it every three to five years, making any necessary adjustments based on changes in your estate.
Passing down accumulated wealth from one generation to the next is one of the most important financial goals of an individual. And that’s what estate planning is all about. Contact your estate planner or award-winning fee-based financial planner to secure all your properties, financial investments, and personal accolades for all your inheritors.