Not many people think about estate planning as often since the majority assume it is too early to think about this small detail. However, even though an estate plan is the last thing you want to consider, your family needs you to start this process because they are the most affected.
You will most definitely need to put in some work and make some difficult decisions; it is all for the best benefit of your family. So, we have prepared a couple of estate planning tips that will make the entire process much easier for you and your family.
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You Should Act When the Times Are Good
Your estate plan consists of a great number of legally binding documents. Just as with any other estate plan, you will not be able to sign these documents without being of sound mind.
For instance, you will not be able to execute your will unless you have the capacity for it. To this end, there is a point in time when it is too late for you to start working on the estate plan, opening the possibility that you may die before writing the actual estate plan.
Without further ado, no matter how difficult it can be, you should start outlining your estate plan. However, for this to be properly done, you would like to consult professionals.
Assemble a Team of Professionals
Your top priority when creating an estate plan should be assembling an experienced team of experts who can help you create an estate plan.
Some team members you should collaborate with include a financial advisor, an estate planning attorney who will help you avoid probate with an estate plan, and a tax professional who can map out and tailor customized estate plans for you.
Each person on your team plays a critical role in the process and provides an immense contribution to the legal and financial parts of the planning.
By working with your team, you will maximize inheritance and potentially reduce every kind of tax burden that comes with an estate.
Most importantly, you need to have a strong team so you can create a desirable plan that will ensure that your assets are evenly distributed to the people and organizations you choose.
You Should Outline Wishes in Estate
Your estate plan should contain all of your wishes regarding your assets and dependents at the time of your death. Just as we have previously mentioned, without an estate plan, a judge can make the decisions for you in probate court. For you to avoid probate, you need to include some documentation in your estate plan:
- Advanced Healthcare directive – this document is also known as an advance directive. In short, this is a legal document that offers guidance on medical treatments as well as healthcare services.
- The living will – also known as the medical care directive. This document in particular is responsible for outlining medical treatments you receive and do not want to accept at the end of your life.
- Durable financial power of attorney – durable financial power of attorney provides an individual or organization with the ability to make independent financial decisions in your name and on your behalf in case you are not able to do it on your own.
- Last will and testament – these two legal documents present your wishes for possessions and dependents following your death. When planning your will, you can name your beneficiaries, designate guardians for children, and identify the executor for your estate.
Consider Trusts
A trust is a legal container that is designed to hold your money for your heirs. Once you create trust, you also decide what you intend to put into it, who will get it, and how it will be distributed.
In short, properly structured trust can help you ensure that your plan is done the way you want it to be done and executed as you previously intended it to.
It may also protect your estate from entering the probate phase, where the judge may make decisions about asset distribution and transfer.
Plan for Federal and State Estate Taxes
According to the definition, estate taxes are, in essence, federal taxes on assets such as real estate, cash, stock, and some other valuable belongings.
Generally, estate taxes are paid by beneficiaries once they receive an inheritance and are due within nine months of your death. This can be particularly concerning if the majority of your estate is not in cash.
So, this can lead to problems like selling your other assets, such as stocks or houses. Luckily, there are some preventive measures you can take in order to plan for estate taxes, like placing assets in irrevocable trusts or providing your family members with gifts.
One of the ways to get this right is to talk to a tax professional who can work with your attorney and financial advisor so that they can determine which estate tax planning strategies are most suitable for your situation.
Prepare for Long-Term Care
You should also take some time to work with your financial advisor and prepare for potential long-term care needs. Some of the options to be considered include long-term care insurance, a type of insurance that will have your back when paying for care while still preserving all of your assets.
You need to make sure that you have more than one option and prepare several plans in case your health starts changing. Besides, similar to your retirement savings, you can start saving some extra cash for needs like these. Not only will it help you preserve all of your belongings and assets, but it will also provide you with peace of mind.
Estate planning is quite a stressful event due to the fact that many decisions need to be made and that you need to take all of the factors into consideration before putting the final sign on the paper. This is why you should assemble a whole team of professionals to help you prepare a plan that will be beneficial for your family members as well as you.
