When we talk about estate planning, most people have a misconception that it is meant for the older folks and rich and wealthy people. However, it is completely wrong to think that lower-income people don’t need estate planning. Estate planning is meant for everyone irrespective of their age and monetary status. While we say monetary status, it not only means the income that a person earns but also the savings which are actually a more important factor in building an estate. While the high earner comfortably saves, it’s challenging for a low-income individual to save money while fulfilling the basic needs of their family.
Low-income individuals generally are liable either to low or no income tax which is quite advantageous. On the other hand, the high-income earners have to pay a hefty amount in taxes which costs them to lose a good sum of their income. Also, as compared to rich people, low-income individuals are less likely to buy expensive clothes, vehicles and leisure items which requires maintenance and insurance costs.
They also don’t go for expensive vacations, etc., which can be savvy as well. On the other hand, the high-income individuals spend a good amount of their income on all such aforementioned expenses which swipe away the advantage that they hold on low-income earners. Also, the residential area where the individual resides plays an essential part in saving or spending a good amount.
The challenges faced by the people of different monetary classes like low-income earner, middle or high-income earner, etc., are similar depending on the balance of their personal expenses and saving to build their wealth The key message is that irrespective of the income earned, one always manages to save for their future and thus builds their wealth which obviously they want to be used for their family’s well-being while they are alive or even after their death. Thus, if the low-income earners can manage to save even a little bit of money and use their extra time to start a small business or other income resources then they can also build a good estate.
Benefits of Estate Planning For Low Income Individuals-
Thus, irrespective of the amount you have accumulated failing to plan for settling your after-life affairs can have a costly and long-lasting impact on your loved ones. Below are four reasons to let you understand why you must consider estate planning.
1. Protect beneficiaries: At the present time, each and every individual must plan if something happens to the family’s breadwinner(s). Even if you own only your house you reside in, if you don’t write your wishes there won’t be any control over it regarding its future that who will be the owner of the house after your demise. As the main objective of estate planning is to designate inheritors for your assets so that the court needs not intervene to decide it which might take a long time, it can be costly and can create disputes among the family members. As the court is unaware of the nature of your family members and can’t even give a whole of your assets to your surviving spouse which could be something you hadn’t desired. Thus, designating your heirs by writing a will is advised to avoid any such scenarios.
2. Protecting young children: It is true for everyone that we don’t want to die young and even can’t think of it happening. However, life is unpredictable and thus if you have young children you need to plan for them. To be assured that the children are raised in the manner you want, you have to name a guardian for them in the event if both the parents die before they become adults. Failing to do so, the court will have to step in to do so and could designate someone whom you have never chosen. To avoid this, you must responsibly designate a guardian of your choice who is willing to take responsibility and shares a good relation with your children.
3. Tax saving: You must plan your estate in such a way that the transfer of the assets creates a minimal tax burden for your loved ones. There are lots of options to reduce the taxes that might have to paid by the heirs. Failing to do so, your estate might invite hefty federal and state estate and inheritance taxes.
4. Prevent family disputes: If you haven’t plan your estate properly, it might lead to disputes among the family members thinking that one has got more than the other or one deserves more than the other. Such disputes can get clumsy and might end up in court. To avoid this, you can mention specifically and clearly in your estate plan regarding the distribution of the assets. Also, you can plan for specific family members like minor or special need, to ensure their care and well-being. The division of the assets completely depends on you and your family situation.
If you want your assets and family to be secured while you are not around with them to do so, you must plan your estate irrespective of the wealth you own. Otherwise, this might cause lots of problems for your family like taxes, probate, disputes, etc.