The Ins and Outs of Estate Planning
Estate planning is the legal process of preparing for the future. Though it can feel morbid to think about what will happen when you die, estate planning will make everything easier for your loved ones. Creating a plan shows you care about them and makes it straightforward for family or friends to follow your wishes. Estate planning covers many different legal aspects, which will be different for everyone depending on their family and their assets. Hiring an attorney to assist in estate planning can take the stress out of the process. This article will cover the importance of estate planning and what it all entails.
What Is Estate Planning?
In simple terms, estate planning is the preparation of tasks to manage a person’s assets in the event of their incapacitation or death. Most estate plans are made with the help of an attorney who is experienced in estate law. Estate planning can be a complicated task, but it will make life easier for loved ones if they have a plan to follow in case of death. Furthermore, estate plans will take care of your business, property, and other assets after death. It will ensure someone you trust looks over the whole process, and your heirs receive what you have allotted to them. There are many different components of estate planning, including:
- Writing a will.
- Taking inventory of tangible and intangible assets.
- Accounting for your family.
- Establishing your legal directives, including a medical care directive and power of attorney.
- Reviewing your beneficiaries.
- Noting your state’s estate tax law.
- Planning to reassess if anything changes in your life.
Why You Need an Estate Plan
Making an estate plan can seem overwhelming, but there are many reasons you should do it. If you have children, estate planning is essential. You’ll need to name a guardian in the event something happens to you. Furthermore, making sure your life insurance will cover any bills or tuition payments is essential, as is documenting how you would like your children to be cared for. Here are a few other reasons why an estate plan is so important:
- Distributes assets and legacy wishes.
- Minimizes the probate process and any expenses, delays, or loss of privacy.
- Avoids any fighting among family members left behind by giving clear direction.
- Ability to incorporate charitable giving and business succession.
- A financial power of attorney allows someone to help with financial affairs if you are unable to manage them.
- With a living will, a health care proxy gives someone you trust the authority to make healthcare decisions for you in case you cannot make them yourself.
- Beneficiaries can be set up for family members you want to look out for after your death.
- Covers funeral expenses and makes any final arrangements you wish.
Essential Components of Estate Planning
As mentioned, estate planning includes different legal directives that prepare for the future. The estate planning checklist will be different for everyone, but there are several essential components that most people will want to think about. If you choose to work with an attorney, they can help you determine which documents are most vital to your estate planning. Remember that aspects of your estate plan will change with time. It’s crucial to reevaluate after any significant life changes, or if you’d ever like to add something that was missing before.
Write a Will
There are two types of wills, a living will and what is sometimes referred to as a “last” will. Writing a living will is very important if you have young children or other people under your care. A last will and testament will outline who you’d like to inherit your property and any other assets or specifications you’d like to include.
Take Inventory of Assets
Taking inventory of tangible and intangible assets is an essential part of estate planning. Tangible assets include homes, land, other real estate, vehicles, collectibles, and other personal possessions. Intangible assets are checking and savings accounts, life insurance policies, stocks, bonds, ownership in a business, and retirement plans. You may not be aware of how many intangible assets you have since they aren’t objects you can see, like tangible assets. Hiring an attorney to help you inventory your assets is a great idea, especially if you need help estimating their value.
Account for Your Family
Accounting for your family in estate planning means checking your life insurance plan and documenting wishes for your children’s care. If you have a living will, that will outline anything important regarding your dependents. You can name a guardian and even a back-up guardian if you think that’s necessary.
Establish Legal Directives
Establishing your legal directives, including a medical care directive and power of attorney, is an essential step in estate planning. There are several ways to go about legal directives. In some cases, a trust is most appropriate. With a living trust, you can allocate portions of your estate while you’re alive. Then in the case that you become ill, your trustee can take over. Upon death, the assets from the trust will transfer to your beneficiaries. This route bypasses probate, a court process that can distribute your property how it chooses.
Other legal directives include establishing a medical care directive and financial power of attorney. As mentioned, a living will and a power of attorney for your healthcare layout exactly what decisions would be made and by whom if something were to happen to you. Similarly, the financial power of attorney gives someone you trust the authority to make decisions for you in the case that you cannot. Giving someone power of attorney is a very powerful legal action and should be considered with the utmost care and trust.
Note Estate Tax Laws in Your State
Estate tax laws vary depending on where you live. By estate planning, you are often minimizing any estate or inheritance taxes. But it depends on the state. Some states have estate taxes, and some don’t. The same goes for inheritance taxes.
Reviewing your beneficiaries may need to happen more than once. For example, if you get a divorce but your ex-spouse is still a beneficiary of your life insurance, then your current spouse will not receive any of the policy’s payout if you should die. Estate planning can also include looking at your marital estate, especially if you went through a divorce or separated from a partner. It’s also important to name back-up beneficiaries and not to leave any beneficiary sections blank. This means the state will get to decide who gets the property.
Reassess if Anything Changes
Unfortunately, estate planning is not a one-and-done deal. But, that can also be to your advantage. Making plans for the future is crucial, and when things change in your life, you’ll want to make sure your estate plan gets updated, too.
Benefits of Hiring an Attorney for Estate Planning
If the prospect of estate planning makes you anxious or nervous, it might be wise to hire an attorney to assist with the process. Working with an attorney who has expertise and experience in estate planning will make it easier to know exactly what you need and how to go about it. Take the stress out of making plans for your estate by hiring an attorney to assist you.