Helpful estate planning tips to keep in mind
Deciding to set up an estate plan is a wise and responsible decision. No matter your age or how much you own, having an estate plan has many benefits. It protects your loved ones from the stress of wondering what you would like to happen after you pass away and reduces the chance of conflict.
You may assume a complete estate plan consists of a will, but there are several other documents that can be part of an estate plan, such as power of attorneys or trusts.
Although you may eventually decide you need these or other additional estate planning documents, having a basic will drafted is a good place to start.
List your assets and debts
There are some steps you should take to prepare before having any estate planning documents drafted. Since a will is designed to distribute your assets to the proper heirs upon your death, you must account for all the assets you own.
Assets include physical and non-physical items. Make a list of both.
Physical items include homes, vehicles and personal property such as furniture or jewelry. Non-physical items include bank accounts, retirement accounts, business interests or intellectual property you may own, such as copyrights or trademarks.
Obtain a value for each asset. It might be difficult to get an exact value for some assets. In those cases, try to get the most accurate estimated value.
Next, do the same for your debts. Unfortunately, most debts do not go away once you pass away. Your assets must usually be used to pay for your debts. Make a list of your debts and a current balance of each. Update this list as the balances change.
Choose beneficiaries for your accounts
Review any retirement accounts or life insurance policies. These assets typically allow you to choose a beneficiary, which is the person who receives the account balance or insurance proceeds if you pass away.
If you have a beneficiary selected, these assets usually do not need to be included in your will, since they will automatically go to your chosen beneficiaries.
You may be given an option to select a secondary beneficiary. This is a good idea, particularly if your primary beneficiary is your spouse, who may pass away before you do.
Large estates are often subject to substantial estate taxes. You can potentially avoid this by placing your assets in a trust.
Trusts and powers of attorney
There are various types of trusts that have different requirements and options. Talking with someone experienced with estate planning can help you learn what type of trust is best for you.
Powers of attorney are another estate planning document to consider. You can set up a financial power of attorney, healthcare power of attorney or both.
Both types are intended to go into effect if you become incapacitated. A financial power of attorney gives someone you choose the power to make financial decisions for you and a healthcare power of attorney does the same for medical decisions.
Estate planning is a task that is easy to put off, especially if you are younger. Additionally, no one enjoys thinking about their eventual death.
However, an estate plan provides you with the security of knowing that your loved ones will be protected and taken care of after you are gone.