You put a lot of effort into developing your financial assets and portfolio. But what about estate planning? 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 estate plan lays out specific instructions for all of your assets, trusts, guardianship preferences, and other matters. This is one of the most assertive, organized steps you can take during your lifetime. These estate planning tips can help you draft your plan like an expert.
Points To Remember Before You Start
- Estate planning involves more than just creating a will. Your plan will be carried out according to your intentions after death if you have considered all your assets.
- No assets or requests will be overlooked by keeping written lists (and alerting your estate administrator where such lists are).
- You can prevent assets from moving through the will by naming beneficiaries on retirement accounts and finalizing the transfer on death designations on other accounts.
So how to do these?
Create A Team
You can create a personalized 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 desire.
Record Your Wishes – Estate Planning Tips
In the event of your death, what you intend to do with your assets and property is subject to probate and 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: Name the people you want to make healthcare decisions for you if you cannot.
Dependable Financial Power Of Attorney: Identifies who will handle your finances if you cannot.
A Living Will: If you cannot advocate 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.
Last Will: This testament enables you to name beneficiaries for your assets and guardians for your minor children.
Establish A Guardianship For Dependents
If you have any dependents, such as a youngster or someone you care for who has special needs, you must choose a guardian; if you don’t, a judge will do so.
Ensure you speak with your designated guardian to obtain their approval. But remember that he or she need not be in charge of handling the funds left for your child.
Choosing a couple 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.
Think About Trusts
Consider a trust as a conduit created to store money for your children. 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 in guaranteeing that your plan is carried out exactly as you intended. Make sure you engage with a lawyer who handles trusts and estate preparation.
Make preparations 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. This could be a problem if a large portion of your estate is not genuinely in cash. It 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 suit your situation while working with your lawyer and financial advisor.
Prevent Probate – Estate Planning Tips
Simply put, probate is the procedure through which the courts legally confirm your will. It can be expensive and time-consuming, and it is not private because it concerns public records.
But, the probate procedure may not be necessary for your assets. Go over the probate statutes with your lawyer so you’ll know what to anticipate.
Make Long-Term Care Plans
Imagine if you or your partner need costly long-term care, which depletes any assets you may have initially 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.
Understanding Income In Relation To A Decedent (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 money. If you pass away, your estate or heirs will be required to pay income taxes on any untaxed income.
Examples of income you would have gotten if 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 considers all tax possibilities, speak with your tax advisor.
Notify Your Beneficiaries Frequently – Estate Planning Tips
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, ensure your beneficiary designations align with your estate plan.
Do Not Neglect Digital Assets
Our social media accounts and online storage services for digital files may store many valuable images and important documents that are not accessible to others.
So a “digital fiduciary” should be named in your estate plan. That individual would be granted access to digital data, including login credentials and passwords. Very few regulations can be used to help in this case, and service providers frequently won’t reveal a deceased person’s password. Consult with a lawyer to delete your online presence if that’s what you want to do.