There’s really no time like the present when it comes to planning your estate. Ignoring or postponing estate planning can create several serious problems down the road for you and your loved ones. For example, your personal possessions and other assets could end up in the hands of individuals that you no longer want to have them. The following could also occur:
- Your estate could be reduced by taxes;
- Your minor children’s future could be decided by a court;
- A court may have to make life or death medical decisions on your behalf;
- You may have no say over the management of your assets if you were to become incapacitated.
You can avoid these scenarios by crafting a will and taking other estate planning steps. Here is what you need to do.
Start With a Will
A will is the foundation of smart estate planning. You use your will to specify who will receive your assets and when they are to receive them.
Perhaps one of the most important functions of a will is that it allows you to name a guardian for your minor children. The peace of mind that comes from knowing your minor children will be taken care of by someone you trust is invaluable.
You should review your will periodically to ensure that it still reflects your wishes. You may decide to update your will if there are changes in your life, such as births, deaths, marriages, or divorces in your family.
Next, Focus on Other Important Legal Documents
A durable power of attorney for health care, also known as a health care proxy, allows you to name someone else to make medical decisions for you under certain circumstances. Once it is in place, hospitals, doctors, and other health care providers are obligated to follow your agent’s decisions as if they were your own. Another key estate planning document is a living will. This document generally addresses the type of medical care you want (or don’t want) as it relates to life sustaining treatments.
Update Beneficiary Designations
There are certain rules that govern the distribution of assets not controlled by a will. The proceeds of life insurance policies and retirement plan accounts are examples of non-probate assets. Your retirement plan benefits and life insurance proceeds will generally pass on your death to the person(s) you’ve designated as beneficiary on your account.
As is the case with your will, you should review your beneficiary designations regularly and update them when necessary to reflect any changes that have occurred in your life. You want to ensure that your assets will pass to your loved ones exactly as you want.
Utilize Trusts
Trusts are at the heart of effective estate planning since they are exceptionally flexible tools that can accomplish numerous objectives. Trusts can provide asset management and protection as well as ensure the future financial security of surviving family members. They can help avoid probate, unify an estate plan, and help reduce estate taxes. They can meet your charitable giving goals and also be structured to support a child or relative with special needs.
Factor In Out-of-State Moves
Income tax and estate tax laws differ from state to state. If you intend to pull up roots and make your home in a new state, investigate your future home’s rules regarding taxes. If there are differences, you may need to revise your estate plan.
Seek Professional Assistance
An estate plan can incorporate numerous, sometimes complex elements. You want to be sure that all the moving parts are working in harmony with your goals. A financial professional can work with your legal counsel to make the estate planning process considerably easier for you.