“It’s years down the road” is what most people’s response is to estate planning and a reason why it falls so low on the priority totem pole. Estate plans are not just for the well to do, many would like to avoid the difficult topic and tasks altogether. Reasoning aside, over 60% of Americans do not have a simple will in order.
However, most of America should have a plan in place.
In congruence with aligning your assets, estate planning should include key documents communicate the variety of difficult issues. For example, who will be the caretaker for your child(ren) if you die, or how family members or friends should handle difficult medical decisions barring you cannot decide for yourself.
Having the help of an experienced team, an estate plan doesn’t have to be such a daunting task. Having the right time, can ensure you don’t sidestep any important documents or fine print within any documents.
Here are 6 steps to Estate Planning 101:
Power of Attorney
Power of attorney is the legal right via document that allows another individual the right / aptitude to make major decisions in the instance you’re not capable of doing so, like medical and financial. These decisions may include dissolving assets to pay for bills, overseeing insurances, and, for medical power of attorney, ensuring you receive the proper treatment want and desire.
There are two different types of power of attorney, financial and medical. It may be a wise decision to assign responsibilities to two separate people. In the instance of choosing a power of attorney for financial, consider someone close to you and one that you can trust. This individual will be receiving your mail, reaching out to your bank(s), delegating assets, and paying of your bills. In regards to medical power of attorney, this individual will decide medical choices. This individual will use your existing ‘living will’ as a reference to decide the care you want. A lot of individuals select a spouse or parent to carry out this task. Regardless of who you select, have a conversation with them so you both are on the same page or tasks and responsibilities that needed to be exercised.
Last Will & Testament
A will is an essential part of anybody’s estate plan. This document holds two purposes.. First, your will goes over the individuals who will acquire your belongings after you die. If you have a child(ren) under the age of 18, it will also designate a desire caretaker or if not complete, a judge with dictate the new guardian.
Documents in a will can be extremely simple or extremely complex depending on what you and your estate delegates. Start by reaching out to a lawyer. This experienced individual will lead you through the will process. Quite a few lawyers offer a flat fee for a generic will to be drafted, which can range from a few hundred dollars to over a thousand. In additional, you may consider consulting with your finance advisor to help you get a grip on all your assets / belongings.
In addition, you will also need an executor, or the individual or institution who will delegate your wishes for your estate as well as your will. This individual’s or institution’s responsibilities may include inventory of your belongings, property sale, and tax management. When selecting your executor, pick a person that you see fit for the job, a person who is smart, of high character, and can make difficult decisions if the time comes.
Contrary to popular belief, an estate plan does more than appropriate your assets; the plan also gives a road map for family and friends as to your medical wishes and quality of life desires, in the instance you are not capable to vocalize your wishes for yourself.
Generally living wills cover the following:
- Pain Management & Relief
- Life-prolonging Treatments
- Usage of Life Support
- Food and Water consumption (for example: feeding tube)
- DNR requests ( do not resuscitate )
Your designated lawyer can help you create a living will alongside your estate plan. It is advised you send a copy to your primary care physician so everyone is on the same page and the document is now apart of your medical history. These important documents are often thrown together with the medical power of attorney papers, so think about the accessibility that your doctor has to important medical wishes.
Do you have life insurance? If not and you have young children, own a home, or have unresolved debts or estate tax when you pass away, life insurance is a good idea. You don’t want to pass financial burdens on to loved ones.
Starting a Trust
When starting a trust there’s a notion that they are only for the well to do. Yet, trusts serve a crucial role in many estate plans, possibly even yours. Trusts allocate you better control to how your assets are assigned and can keep your belongings out of public sight.
A trust can also cover the following:
- Reduction of taxes owed by the estate and its heirs.
- Protection of belongings from creditors and / or lawsuits.
- Conditional requests of how, where, and when belongings are distributed.
Many use a trust alongside a will, but a trust generally is more costly. Developing an estate plan which incorporates a trust can become a fairly expensive task dependent on how complex the estate and items involved are. Developing an estate plan is a one-time cost, however, reoccurring expenses arise when revisions are need ed.
Trusts come in many different varieties, each having their own pros and cons. The most well-known trust is a living trust, which lets you retain control of the assets you place in the trust while you’re alive, then shifts these items to the proper heirs after your passing.
Updating of Your Plan
Establishing an estate plan is an awesome accomplishment. However just because “it’s done”, doesn’t mean you let it never touch it again. The reality is that you will need to update your plan. And fairly often. It needs to continually reflect what you want, need, and wish which often changes with time.
When the time comes and you decide to update your estate plan, keep this in mind.. Update your beneficiaries. In general financial accounts, like insurance and other accounts, make you appoint a beneficiary. That being said, the beneficiary selections will generally over r ule directions written in your will. During the estate planning process, it’s a good idea to ensure you’ve selected your beneficiaries in every respective account. Also, to understand and acknowledge whether those beneficiary selections coincide with your plans and ideals.
We recommend reviewing your estate plan every 2-5 years. With updates after major life events (like marriage or if you have a kid ). Also, changes in financial status; large purchases; or other events like filing for bankruptcy, retiring, or selling your business will elicit a review of your plan.