It’s probably not something you want to think about, but making preparations for when you die is important, whatever age you might be today. You might think you have no possessions worth worrying about. However, everyone has at least a few items of value and things other people might consider precious. For example, do you have a car, home, bank accounts, personal possessions, furniture, real estate, or investments? These things make up your estate, and here’s where estate planning comes in. You should think about and plan for what happens to them. After all, you can’t take any of it with you.
What is Estate Planning?
Estate planning is making a plan that explains how your estate should be disposed of after your death. It is a way of controlling how your estate is divided up, who will receive certain things, and how and when they receive them. You might also want organizations you care about to receive something. In addition to ensuring your wishes are fulfilled, estate planning also makes sure you pay minimal taxes, legal fees, and court costs. It is also a way of making provisions if you become incapacitated and unable to manage your financial affairs.
What Constitutes Good Planning?
As with most things in life, there are good and bad ways to plan. Having a proper estate plan means much more than just a list of people or organizations you want to receive things after you die. Proper estate planning should also include instructions relating to:
- How your values and valuables get distributed
- How you want to be taken care of if you become disabled before your death
- For any minors, a named guardian and inheritance manager
- Provisions for any members of your family who are irresponsible with money and those with special needs
- Instructions on what happens to your business when you retire, become disabled or die
- Life insurance provisions
- Minimizing taxes, avoidable legal fees, and court costs
Another feature of a proper estate plan is that it’s regularly reviewed and updated. As you know, things can change in the blink of an eye, and you want your plan to be relevant and up to date.
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The Benefits of Estate Planning
You might think there’s little benefit in making an estate plan, but you’ll be surprised. Why do you think there’s no need for such provisions? Is it because you’re still young and healthy? Would you rather not think about such a morbid subject? Let’s give you a few reasons why you should think about it today.
Provide for Your Loved Ones
If you die without making plans, the probate process can take months, even years. With a proper estate plan in place, your estate is distributed according to your wishes within a few weeks. Not only will your family and friends be taken care of, but your plan can also include provisions for your pets.
Your Last Wishes Will be Followed
Are you worried that when you die, your last wishes will not be respected? With a proper estate plan in place, this won’t be an issue. Your wishes are documented, and therefore, they must be followed to the letter. Your wishes will be respected because part of the process involves appointing an individual or company to act as trustee of your living trust. They are responsible for making sure your wishes are respected, and your estate distributed correctly.
The Financial Benefits
Drawing up an estate plan means there’s no need for probate. It means your loved ones will not have to pay attorney and court fees. You can avoid high taxation, and your heirs also avoid paying a percentage of their inheritance toward any estate tax due.
Child Care Provision
It’s not the most pleasant of scenarios to consider, but what will happen to your children if something happens to you while they’re still minors? If there is no provision for their care, they may end up in the care of Child Protective Services. A court will decide who will be the best person to act as guardian.
Spare Family Members from Making Tough Decisions
When a loved one becomes terminally ill, falls into a coma, or dies, family members must make decisions that can be heart-breaking. You can ease the burden of such choices if you’ve already made them for yourself.
Benefits You While You’re Still Alive
One area in which you can benefit relates to health care. Estate planning ensures you’re eligible for Medicare and other government benefits. It means any health care costs are reduced, and there is more money for your loved ones.
In the Case of Incapacity
Have you thought about what might happen should you become incapacitated? It might be because of an illness or medical condition. You may become incapacitated because of an accident. It’s possible to include provisions in your plan to cover such eventualities with a power of attorney, saving your family time and money.
Do You Have a Favorite Cause?
If there’s a charity or cause that’s close to your heart and you’d like to make a difference you can include it in your estate plan. You might not have millions of dollars to leave to charity, but a few hundred dollars stipulated in the beneficiary designations can help others.
What Happens if You Don’t Have a Plan?
Someone else will be in charge of how your estate is divided up. You probably won’t be pleased with what’s decided because it will be left to the state, probate court and officialdom. Let’s face it; they might not have you and your family’s best interests at heart.
If you find yourself incapacitated, the court will appoint a personal representative to control your assets. Your family will have nothing to do with it. This can often be very expensive and time-consuming.
If You Die Without a Plan
Should you die without a plan, the probate laws of the state in which you reside determine how to distribute your assets. In most cases, this means your estate will be divided between your spouse and children. If your children are minors, the courts will control their inheritance.
You have a choice in such matters, and the best course of action is to control who receives what and when. Without a plan in place, the courts will make these decisions. If your children are still young, the courts will decide who raises them.
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Who Can Help with the Estate Planning Process?
It is possible to do your own estate planning. There are numerous do-it-yourself estate planning software applications. However, the best course of action is to contact an estate planning attorney. Qualified estate planners help with:
- Drafting revocable living trusts
- Mapping a standard living trusts
- Growing a plan to help you avoid estate taxes
- Ensuring your savings and assets are safe after your death
- Ensuring the business, you have built through the years will have sustainable succession planning
- Preparing a power of attorney
- Providing and organizing health care directives
- Ordering a personal representative to look after your deeds if you become mentally incapacitated
- Avoiding guardianship or conservatorship issues
- Give you peace of mind knowing your last wishes will be respected
The Cost of Planning Your Estate
There’s no one-size-fits-all solution for estate planning. That makes the cost difficult to predict. The best approach is to do some research before you commit yourself. Understand the basics of a proper estate plan and consider the adage, “You get what you pay for.” A good estate planning lawyer will not be cheap. However, if you don’t do things properly in the beginning, you might stand to lose far more in the long run.
Choose the right attorney, and you’ll be working with someone who specializes in this area of practice. You will also pay for their expertise accumulated over the years. You also need to consider how much your peace of mind is worth. Knowing that when you die, things will be taken care of exactly how you wanted is almost priceless.
Now is the Best Time to Plan Your Estate
How old are you now? Are you in your 20s, 30s, 40s or a little older? It’s not too early or too late to start making plans. Of course, you don’t want to be thinking about your mortality, but do you know what’s around the corner? Hopefully, you’ll live to a ripe, old age, but nothing in this world is inevitable. Educate yourself about elder law, and don’t get caught off-guard. You could wait until tomorrow, but what’s the point in that? It’s possible to get the ball rolling right away.
10 Estate Planning Steps to Take
If you’re ready to do the best thing for you and your family’s future, here are some of the critical issues. A reputable estate planning attorney will guide you through the estate planning process, but it always helps to have a basic understanding of it.
Make a will
A will allows you to state who inherits your property. You also name a guardian to take care of your children if something happens to you and your spouse.
Consider a living trust
Living trusts are very similar to a will, but they cannot be used to name guardians for your children. A living trust can also be used to avoid probate, whereas a will cannot. Living trusts also provide creditor protection for any inheritance you leave and protect government benefits for a person with disabilities. A trust can also reduce estate taxes and administer assets for minor beneficiaries.
Make health care directives
A health care directive offers protection if you become unable to make your own medical decisions. It gives someone of your choosing the power to make them on your behalf.
Make a financial power of attorney
A power of attorney can be used if you become incapacitated and unable to handle your financial affairs. A named person is given the authority to handle your affairs. A durable power of attorney is also an option. Financial advisors will brief you on the relevant powers of attorney.
Consider life insurance
Life insurance is often a good idea if you have young children, own your own home, or have sizeable debts. There are plenty of life insurance policies to choose from, so do your research.
Protect your children’s property
If your children are still minors when they become heirs, name a responsible adult to manage it. This person could also be their legal guardian.
Cover your funeral expenses
One option is to pay into a funeral prepayment plan. Another option is to open a separate bank account and regularly put aside funds to cover the cost of your funeral.
Find out about estate taxes
Estate taxes are payable when a person inherits money or property from a person who has died. There is a minimum threshold, and anything over that amount is subject to tax.
File beneficiary forms
Bank accounts and retirement plans can be tied up for months, even years, because of the probate process. You can bypass this process by naming a beneficiary. This makes the account automatically “payable on death” to your named beneficiary. It’s also possible to do the same with bonds, stocks, and brokerage accounts. This allows your heirs to continue investing and make money in stocks.
Store relevant documents
One final consideration is to ensure all legal documents are safely stored with your digital assets with your attorney or estate executor. If your survivors have access to all the necessary estate planning documents, it makes things more manageable and less stressful.
Hopefully, you’re now a convert to estate planning and ready to take the next step. We’d love to hear how you get on. If you know anyone who is teetering on the brink of making important decisions, help them take control of their future with an estate plan of their own.