Estate Planning 101
Posted By :Ben Williams
Posted At : Tuesday, Jul 27, 2010
You have taken all the right steps to ensure your financial security. You have set up a six month emergency fund. Your mortgage is all paid off. You have a diversified portfolio in stocks, bonds and even some real estate. Everything is where it should be and you are feeling pretty good about where you are financially. But have you thought about what would happen if you weren’t around anymore? Who would get all of these assets that you have worked so hard to build up and maintain?
Estate planning probably isn’t a topic that any of us are looking forward to, but it can be as important financially as setting up a retirement account. A person who dies without a will or estate plan is deemed “intestate” and the government will act on your behalf and determine who gets what of the assets you leave behind. Neither you nor your loved ones will have any say in the apportioning, and you know that when Uncle Sam gets involved he will take as large a slice of your pie as possible. So in order to circumvent the potential hassles of determining who will inherit what here are some steps that you can take that will put you in the right direction in your estate planning.
Step 1: Make Goals for Your Estate
Determine who you want to inherit your estate and what portions you want it to be broken up into. First, make a list of all of your assets that would be considered a part of your estate, including bank accounts, property, certain financial investments, auto mobiles, furniture and jewelry; essentially anything you own that is not previously signed over to somebody like a life insurance policy. Second, make a list including the names and ages of all the people you wish to appoint as beneficiaries.
Step 2: Seek Legal Assistance
Estate planning can be very difficult in nature and the technical jargon involved can be baffling. With the aid of an attorney who specializes in estate planning and will writing, you can better comprehend what needs to be done to ensure you are headed in the right direction. Legal advice can also help you understand some of the tax implications of estate allocation (Estates can be taxed up to 45 %!) and the best ways to avoid them. So to ensure that you are leaving behind as much as possible to your loved ones, find out about the different ways to avoid taxes.
Step 3: Write a Will
A will is a legal document appointing the beneficiaries of your estate after you die. With a will you are be able to determine exactly who will be left in charge of your assets after you pass on. Writing a will can be tricky, either hire a lawyer to help you out or purchase a software package to assist you to ensure that your will is complete and legally sound.
Step 4: Set Up Trusts
Although they are not necessary, trusts can help you manage your estate by allowing you to transfer some of your assets to a beneficiary while you are living. Trusts also allow your loved ones to forego some of the hassles involved in a will while ensuring that the asset is well managed.
Step 5: Determine Your Health Care
In the event that you are injured and are unable to make medical or financial decisions for yourself, it is important to entrust someone with these responsibilities. Select somebody you trust to make necessary medical decisions for you and to determine, with doctors aid, what treatments will be best for you. It is also important to select someone you trust to oversee your financial matters if you are incapable.
Step 6: Protect Your Beneficiaries
If you have children that you are leaving your estate to, assign a guardian to look after them and the inheritance you left them. This is a weighty responsibility, so once again make sure you are selecting somebody you trust. Also, for assets such as bank accounts and retirement plans file beneficiary plans with your bank so that the funds do not have to be involved in the probate process of the will.
Other Items to Consider
Life Insurance- a great way to ensure your loved ones have money left after you are gone either to replace your income or to pay off any debts you leave behind.
Funeral Costs-this expense can be a huge burden on a family especially during a very emotional time. Set up an account to help pay for a portion of it.
Document Storage-your will is no good if nobody can find it. Make sure that the person you wish to execute the articles in your will knows where it is.
Update Your Will-after you write your will make sure you update it to include new beneficiaries you may wish to add or new assets that will need to be allocated.
While estate planning isn’t exactly the most pleasant of topics it is one that is necessary for your financial wellness. Where your assets go and who gets what is very important, and through estate planning you can help your loved ones make some of the tough decisions after you pass away. As Benjamin Franklin said, “In this world nothing is certain but death and taxes” But by taking the proper steps in estate planning you can lighten some of the sting of death and help avoid some of those taxes.