Important Considerations For Estate Planning
Many people put off estate planning because they are uncomfortable discussing what happens after death. Others think estate planning is only for the wealthy and that they have no “estate” to plan for.
Both types of people need to understand the importance of estate planning. It is the only way to ensure your property is distributed according to your wishes after you die. For example, do you intend to leave your mother’s heirloom necklace to your oldest daughter?
Unless you specifically state your intent in your will or trust, that transfer will not happen. Your property, including the heirloom necklace, will be distributed according to the law of the state where you die.
If you don’t think you have enough property for estate planning, look around you. Do you own a car? Do you have a bank account? Retirement plan through work? Furniture? Minor children, who may need to be cared for? There are many reasons why you need to consider estate planning.
What Does “Estate Planning” Mean?
Estate planning means organizing your financial affairs so that your family knows your wishes if you become incapacitated or die. If you die, your assets are distributed according to your desires. There are several estate planning tools that can help your family and even save them on taxes if you should pass away.
Part of planning for your family’s future is to purchase a life insurance policy naming a beneficiary. Upon your death, the funds go immediately to your beneficiary without going through probate.
For all of your bank accounts, you can name a beneficiary who will have immediate access to the funds without waiting even a day before accessing them. When your beneficiary can access the bank accounts and receive the proceeds from the life insurance policy, the mortgage or rent can be paid, the car payments made, and your loved ones can even buy food and gasoline.
What Are the Most Important Estate Planning Documents?
Although a will is likely the most important estate planning document you need to have, there are other tools to consider, depending on your financial situation and what you want for your loved ones’ future. Some of the most critical documents you need are:
Last Will and Testament. Your estate planning attorney will know the laws of your state concerning the preparation of a valid will. Some states require the will to be signed in front of a notary, and others require the will to be signed by two witnesses.
In your will, you identify assets you own in your name — assets that are your own personal property. You name the asset and who you want to leave it to. For example, do you own a sports car you want to leave to your son? If so, you’ll want to say this in your will.
Do you have a relative or someone who may expect to be a beneficiary that you want to disinherit and leave nothing? Say so specifically in your will. Be sure to comply with your state’s rules regarding disinheriting heirs. If you fail to mention them, that opens the will up to a challenge, as the heir may claim that you intended to leave them something in your will, but you just forgot.
A will must be submitted to probate. An administrator or personal representative is named to oversee the distribution of your assets and payment of any debts of the estate. Prior to the close of probate, the personal representative must submit a document to the probate court verifying that all debts have been paid and all assets distributed according to the terms of the will.
Irrevocable or Revocable Trusts. Your estate planning attorney can create the best trust for you. Basically, under your name, you will make the trust the owner of the property currently in your possession. The owner is now the trust. In the trust, you list how the property should be distributed at your death. The trust is not submitted to probate, and upon your death, the property is immediately transferred to your named heir.
Guardianship Designation. If you have minor children, you want to be sure to name who you want to care for them in case you die or otherwise are unable to care for them yourself. In some states, you include this designation in your will. In other states, you need a separate document for this.
Other Estate Planning Tools. There are other documents you need, such as a durable power of attorney, which designates someone to make medical decisions for you when you can’t make them for yourself. Another power of attorney for someone to make financial decisions for you when you cannot make them for yourself.
If you’re ready to start estate planning, it’s important to consult with an estate planning attorney to discuss your options. Get started today and discover what estate planning tools are best for you.