Estate planning is a process that involves creating a plan that allows your beneficiaries and heirs to receive your assets if you die or are incapacitated. It can be done with the help of an attorney. One of the goals of this process is to minimize the impact of estate and gift taxes. Here are the basics of planning your estate.
Create an Inventory
Even though you may think you don’t have enough money to fund an estate planning process, having an inventory can still be beneficial.
The assets in an estate may include various types of real estate, such as houses, land, and automobiles. Other personal property, such as art, jewelry, and trading cards, can also be included in the inventory.
In an estate, the intangible assets may include various financial instruments such as certificates of deposit, checking and savings accounts, and retirement plans. Some of these include health savings accounts and business ownership.
Before you start the estate planning process, you must have an estimate of the value of your various assets. This can be done by using a home value calculator or looking at your financial accounts. If you don’t have an outside valuation, it’s also vital that you value your assets according to how they will be distributed to your loved ones. Doing so can help ensure that your possessions are fairly distributed.
Consider Your Family
Before starting the estate planning process, you must know what’s in your estate. Understanding how you will protect your family and assets after you’re gone can help ensure that you have the financial resources to meet their needs.
One of the most critical steps you should take when it comes to estate planning is to create a will that clearly states who will be your children’s primary and secondary legal guardians. This can help avoid costly court fights and help ensure that decisions regarding your children are based on your wishes.
A complete estate plan can also include various legal directives. For instance, you can create a trust or a revocable living trust. With a trust, you can distribute some of your assets to certain items while you’re still alive.
The trustee of a trust can take over when you become incapacitated or ill. After your death, the trust assets are distributed to your designated beneficiaries. This can avoid the court process known as the “probate” process.
A medical care directive is a legal document that states your wishes regarding your health care should you become unable to make these decisions on your own. You can also give medical power of attorney to someone capable of making decisions for you. This type of document can be combined with an advanced health care directive.
A financial power of attorney can also be a helpful legal instrument. It allows someone to manage your financial affairs on your behalf if you cannot do so alone. This can include managing your assets and paying your bills.
Go Over Beneficiaries
Your will and other documents may not be all that comprehensive. Before you start the estate planning process, you must have an estimate of the value of your various assets. You can also check your insurance and retirement accounts to ensure they have the necessary beneficiary designations.
Make sure that the people you named as your beneficiaries get your stuff. Your spouse might not receive the total payout if you don’t have the correct beneficiaries on your life insurance or retirement accounts.
Make sure that all of your beneficiary sections are clearly written. If an account goes through the probate process, the property may be distributed according to the rules of the state where it originated.
Your life changes constantly, so it’s vital that you update your estate plan regularly. Even if your situation doesn’t change, you must update your estate plan regularly. It can help keep the legal boundaries of your assets and ensure that your decisions are carried out according to the current laws.