Happy tax season! Or, should we say, tax refund season. You’ll be getting your tax refund eventually, and there are some pretty good ways to put it to use. You might be tempted to go and spent it on a major purchase or on something else you want (but might not need). However, when thinking about what you want to spend your refund on, you should consider using the money to purchase a gift that keeps on giving: an estate plan. You will be able to create an estate plan that will benefit you immensely and pay off in the long run. Here’s how:
What’s so great about estate plans?
You might be wondering why you should spend your tax refund on an estate plan, as opposed to something more fun-sounding. Well, an estate plan is fun, just probably not in the way that you’re thinking. It protects your future and your family’s future. It allows you to set aside your assets, financial and healthcare directives, and maintain personal protection in the event that you become too sick or incapacitated to do so yourself. It is a long-term tool that provides massive benefits. You won’t know how much you need one until you don’t have one, and then, the results are disastrous.
A first major consideration is your financial health. You want to set aside certain assets for certain family members before you die, or perhaps you have a business that you want to protect. An estate plan will contain all your instructions for maximizing financial health and wellness, and you will also be able to appoint a financial power of attorney who will help you manage your finances. This power of attorney is trustworthy, and he or she can ensure that your financial decisions are honored the way they would be if you yourself were making them.
Physical and Mental Health
Along those same lines, your physical and mental health are both very relevant in the estate planning decision. Have you considered what will happen if you are sick or incapacitated? You can appoint a power of attorney of healthcare and pass a healthcare directive that will allow you to make healthcare decisions even if you unable to do so yourself. The hospital will observe your directive and instructions, honoring your wishes so that you have peace of mind when you are sick.
Helping Your Family
Another very important aspect to estate planning is the way it allows you to help your family. For example, if you have kids, you can set aside guardianship papers for them in the event of a disaster where they are left without you. That way, you know they will be with someone you trust. Also, you can set aside money in tax-advantaged savings plans that will help you save up for tuition for someone’s college. These savings plans come from the IRS, and they are very helpful in preparing for higher education and reaping tax benefits.
Last but not least, estate plans allow you to avoid probate, which is a stressful process that has no winners. Probate court is where your family goes if you die without an estate plan. The judge makes decisions about your finances, and he pays off your debtors and your family gets what is left. This process is arduous and often expensive. It doesn’t allow asset transfer for a while, which is inconvenient. Having a good estate plan will allow you to avoid that.
All of these above reasons are just some of the many ways that you can use estate planning to achieve your financial goals. That major purchase will be there next year. This year, use your tax refund money to start an estate plan that will last during your lifetime and benefit you and your family for years to come. It will give you and them peace of mind, and that is priceless.