Think only the wealthy should engage in estate planning? Think again. Lack of an estate plan might cause your family tremendous hardship and confusion regarding your final intentions.
What distinguishes an estate plan from a will? An online estate planning lays out specific instructions for all of your assets, trusts, guardianship preferences, and other matters. It takes a will one step further, and you’ll be happy you did. These ten guidelines can help you draft an estate plan like an expert and also seek help from your nearest estate planning services provider.
1. Put a Team Together
You can create a comprehensive estate plan that is unique to you by working with a team that consists of a financial advisor, tax expert, and estate planning attorney. Each individual is essential to the process. The objective is to ensure the smoothest transfer of your assets to the individuals and/or organizations you desired.
2. Write Down Your Wishes
What you intend to happen to your assets and property subject to probate upon your death should be expressly stated in your estate plan. Without it, the government might decide for you. Make sure the following elements are included in your estate plan:
- Health care proxy: Names the person you want to make health choices for you in the event that you are unable to.
- Durable financial power of attorney: Designates who will handle your finances in the event that you are unable to.
- Living will: If you are unable to speak for yourself, this document lays out your wishes for medical care in detail.
- Release form for Health Insurance Portability and Accountability Act (HIPAA): Permits designated people to access medical data.
- Your last will and testament gives you the opportunity to name beneficiaries for your assets and guardians for your minor children.
3. Establish Guardianship for Reliants
If you have any dependents, such as a juvenile or someone you care for who has special needs, you must choose a guardian; if you don’t, a judge will do so.
Make sure you speak with your designated guardian in advance to obtain their approval. But keep in mind that he or she need not be the one in charge of handling the funds left for your child.
Choosing a pair to serve as co-guardians may prove challenging if the couple later gets divorced. Consult your estate planning lawyer for advice on how to deal with this situation.
4. Think About Trusts
Consider a trust as a vessel created to house money for your heirs. You choose what will go into the trust, who will receive what, and how it will be dispersed.
A trust that is correctly drafted might assist guarantee that your plan is carried out exactly as you intended. Make sure you engage with a lawyer that focuses on handling trusts and estate preparation.
5. Prepare for Any State or Federal Estate Taxes
Remember that if your estate is liable to federal estate taxes, they are typically payable in cash within nine months of your passing. If a large portion of your estate is not truly in cash, this could be a problem. That can entail selling property, such as a home you might have intended to leave to an heir.
Consult a tax expert who can decide which estate tax preparation options would be suitable for your situation while working with your lawyer and financial advisor.
6. Avoid Probate
Simply simply, probate is the procedure through which the courts legally confirm your will. It can be expensive and time-consuming, and because it concerns public records, it is not private.
Good news: The probate procedure may not be necessary for your assets. With your lawyer, go over the probate statutes so you’ll know what to anticipate.
7. Be ready to Accept Long-term Care
Imagine if you or your partner need costly long-term care, which depletes any assets you may have originally set aside for your heirs. Your assets can be protected while you plan for long-term care needs with the aid of a financial counselor. In case your health changes, make sure to explore your alternatives and develop several plans.
8. Be Aware of Any Income Owed to a Deceased Person (IRD)
You should be aware of additional taxes than the federal estate tax. Income in Respect of a Decedent, or IRD, is a little-known tax that affects people who inherit specific sorts of money. Your estate or your beneficiaries will be required to pay income taxes on any untaxed income if you pass away.
Examples of income you would have gotten had you lived include earnings on savings bonds, distributions from individual retirement accounts, and sales commissions.
To be sure you have a comprehensive estate plan that takes into account all tax possibilities, speak with your tax advisor.
Additionally, keep your beneficiaries informed. One pitfall to watch out for: Even if your estate plan specifies otherwise, whatever money you have in accounts with identified beneficiaries will go to those people. That covers 401(k), IRA, insurance plans, payable-on-death, and transfer-on-death accounts, among other things.
To avoid problems, make sure your beneficiary designations are in line with your estate plan.
How Much Does Estate Planning Costs?
Remember to Consider Digital Assets. The majority of us have many priceless images and crucial papers stored in social media accounts and online services for digital file storage that may be unavailable to others.
There are very few regulations that can be used to help in this case, and service providers frequently won’t reveal a deceased person’s passwords. What ought you to do? A “digital fiduciary” should be named in your estate plan. That individual would be granted access to digital data, including login credentials and passwords. Don’t forget to consult with a lawyer to delete your online presence if that’s what you want to do.
One of the most proactive, organized activities you can take during your lifetime is estate planning. The advantages will also be a part of your legacy.