Estate planning is the preparation of various aspects of asset management in case of incapacitation or death. Simply put, it involves making arrangements on how you wish to preserve or distribute your assets when you no longer can manage them. Here, assets can refer to real estate property, cars, jewelry, stocks, savings, pensions, etc. Financial obligations like debt are another component of estate planning.
Part of estate planning also entails paying estate taxes for setting up trust funds, donating to charities, and the like. During this process, you must create an estate plan consisting of a will, a living trust, and power of attorney.
It’s never too soon to start thinking about protecting yourself and your family by creating an estate plan. Here are five things to know about estate planning to help ensure your assets can offer the utmost value to your loved ones.
- Anyone can do estate planning
Estate planning isn’t just for the wealthy. It’s an essential process that can help you protect your assets and ensure the fulfillment of your wishes after you’re gone. In addition, estate planning helps facilitate property distribution according to your wishes.
Planning your estate includes establishing trust fund accounts for your beneficiaries. You must also name the rightful beneficiaries on life insurance policies and retirement accounts. As long as you own assets in any form, making estate planning part of your overall financial plan would be best.
- Create and execute an estate plan, or the state will do it for you
If you don’t establish an estate plan, the state will do it for you after passing. The state will take control of your assets and distribute them according to its laws.
Many states have adopted the Uniform Probate Code (UPC), which outlines rules regarding the distribution of assets upon death. However, this is not a good option for everyone because it does not consider your specific needs or wishes.
You can maintain control of your assets even after death by appointing a trusted representative to administer your estate. This can take some time to agree on the legal terms of appointment, but with the help of law firm consultation services, you’ll be able to create a legally-binding agreement with your representative that shows the state that they’re in control.
This representative is responsible for gathering all your assets, distributing them as directed by your estate plan, paying off any debts and taxes owed, and distributing the remaining assets to beneficiaries named in your will.
- Charitable donations can form part of your estate plan
As you prepare your estate plan, it’s only natural to consider the impact on your loved ones and beneficiaries. However, it’s also important to consider how your estate will impact others outside your family.
Donating to charity is a great way to let your legacy live. However, not everyone leaves behind a sizeable estate for charitable donations. Therefore, you must plan if you strongly consider donating to a charitable organization. It’s not as simple as writing a check or making a verbal commitment.
Make sure your will includes the names of specific charities you want to benefit from your donations and the nature or type of gift you want to leave behind.
- You can do estate planning in stages
You don’t have to get everything done at once. You can start by recording all your assets—and debts—and working with someone you trust to create your will. Alternatively, you can establish a trust, where you assign someone to manage your assets until they’re ready for your beneficiaries to receive them.
However, there’s no need to rush into all aspects of estate planning if you feel unprepared. Plus, if accomplishing these things is too overwhelming, consider enlisting the services of a registered investment advisor to help you plan and execute.
- You can change anything written on your estate plan
It’s not uncommon for people to think that once they write something on legal documentation, it’s binding and definitive, especially on an estate plan. Fortunately, it’s not.
It’s possible to update your will as needed over time. Certain aspects of your estate plan should be subject to change so they’re up-to-date with current circumstances. Your income tax brackets are a prime example of something you should check consistently.
Then again, although you can easily change your will or trust at any time, it’s in your best interest not to make changes too frequently to avoid confusion.
A Plan in Place
Estate planning can be a daunting task for a multitude of reasons. The first and probably the biggest reason why some put off estate planning is they don’t want to think about death, which is understandable. However, estate planning is not necessarily about what happens after you’re gone.
Estate planning is a contingency plan, allowing you to secure your assets for your family, ensuring their well-being no matter what happens. Now that you know some insightful things about estate planning, you can start planning, creating, and executing a well-thought-out estate plan