The financial decisions we make today, will impact our children tomorrow. In fact, the ultimate purpose of wealth accumulation is to pass it onto the next generations in our family line. Once you understand this, your wealth preservation becomes equally important as your wealth accumulation. Several years ago, I had the privilege of taking an Estate Planning course. Although the practice of estate planning has become more common now, at the time I took the course, it was not overly popular. In fact, I had never heard of it prior to registering for the training course. A little over a decade ago, the topic of estate planning was only popular among the rich and wealthy. The average family thought it was only for those who had lots of money and a large estate. I believe that completing the training to become a Certified Estate Planner has had the greatest impact in my life in the area of financial literacy and management. It was during these 8-10 weeks of training, I saw why so many families live under financial stress from generation to generation. I remember leaving this class many times saddened by the secrets being kept from the masses that wealthy people have used for years to maintain their wealth and pass it onto their children.
So what is Estate Planning? Estate planning encompasses the accumulation, conservation, and distribution of an estate. The overall purpose of the estate planning process is to develop a strategic plan that will enhance and maintain the financial security of individuals and their families.
Why do you need an Estate Plan? First of all, let’s see what an estate is. An estate is the total property owned by an individual prior to the distribution of that property under the terms of will, trust, or inheritance laws. An individual estate includes all assets and valuables. Unknown to many, without an estate plan, everything you worked hard for over the years can be lost at the time of your death. So why do you need an estate plan? We need an estate plan to avoid dying “intestate”. Dying intestate means dying without creating a will or trust especially a trust, which provides instructions for passing your estate onto your heirs. Not having an estate plan is like taking your property and throwing it into a cage with hungry lions, namely the state probate process, lawyers, creditors, estate taxes, and federal taxes. I know we don’t’ like to talk about death, but when you die with any property titled in your personal name, there must be a probate process handled by the state for that property. You should have a prepared legal document drawn up out of your name in advance of your death that will take care of getting your assets to the rightful heirs. A good estate planner will strategically prepare this legal document, thus protecting you from a variety of taxes such as state probate(4-10%), gift taxes (18-55%), federal estate (37-55%), capital gains on sale(around 28%). These percentages of taxes vary under different administrations slightly, but still have a great impact on your assets and your ability to pass your hard earned assets onto your children. There are many examples of individuals such as Tupac Shakur and Redd Foxx, who although they had accumulated a great deal of wealth, were unable to pass it onto their loved ones. Today, we live in a litigious society and the moment you get something or start accumulating wealth or reach a certain financial status; you must protect and preserve your property and possessions to leave to the next generation. The good book says it best, “A good man (or woman who is the head of household) leaves an inheritance for his children’s children (grandchildren).” Proverbs 13:22a.
You see we have a financial and moral responsibility to the next generation to leave an inheritance. Several years ago, I learned that it is the preparing of an inheritance (an estate plan) for the next generation that qualifies you for the wealth transfer. This is why the next clause in the above Proverb states, “but the wealth of the sinner is stored up for the righteous.” Proverbs 13:22b
“A good man leaveth an inheritance to his children’s children: and the wealth of the sinner is laid up for the just.” Proverbs 13:22
There are many other components of Estate Planning not discussed in this article; however I have given you the basic concept so that you can start properly preparing an inheritance for the next generation. Below are some practical steps to get you started:
- Contact a Certified Estate Planner or an attorney that provides estate planning services in your state.
- Take an inventory of all your assets and liabilities and list them. Your Estate Planner will need this information first.
- Pray that God makes you a “blessing” to your family, especially your children (Genesis 12:1-3)
- Make sure your estate plan includes your church or some charitable beneficiary.