When you read the word “estate” what comes to mind? Do you think of a mansion, surrounded by acres of beautiful grounds a la “Gone with the Wind”? Maybe you think an “estate” is what rich people leave to their heirs.
But it’s not just the wealthy who have assets – and responsibilities – that get left behind when they die. If you own anything (car, house, bank account), you have an “estate” and if you don’t plan for what will happen to it when you’re gone, you could leave your heirs (kids, spouse, parents, siblings) with a lot of heartache and expensive legal issues.
You may wonder what is estate planning and how can you do it. Simply put, estate planning is the process for deciding how your assets and responsibilities will be handled in the event of your death. It also involves putting in place procedures that can ensure your wishes are carried out once you’re gone.
Some people think it’s OK to wait until you’re preparing for retirement, and address estate planning, too. But if you have any debts or dependents, you should start estate planning, no matter how young and healthy you are.
If you pass away without putting these procedures in place, you risk leaving it up to the courts to appoint a guardian for your kids and to decide how your money will be handled. Your heirs could also face income and estate taxes, court fees and other legal and professional costs in the process of trying to settle your estate.
Some aspects of estate planning are pretty obvious, like creating a will or naming a beneficiary on your life insurance policy. Other facets, like creating trusts, are more complex and you’ll probably benefit from the help of a professional in addressing them.
So now you may be wondering what estate planning has to do with your credit. Well, while estate planning won’t impact your credit score now, providing for the financial future of your heirs could significantly impact their financial well-being down the road.
And while paying down debt isn’t traditionally thought of as part of estate planning, it’s something you should be thinking about throughout the process. Remember, your creditors will expect your debts to be paid from your estate, so minimizing the amount of debt you leave can help ensure your heirs will inherit as much of your estate as possible.