Here, we answer some common questions about estate planning:
What is estate planning?
At its roots, estate planning is a basic division of property and assets after your death. The term “estate” by law refers to anything you would leave behind when you die such as your property, debts, and assets. Estate planning determines who your beneficiaries are, and what they will receive from your estate. An estate plan can be very helpful for the loved ones left behind after your death.
What should an estate plan include?
You don’t have to be wealthy or have large assets to merit an estate plan. Consider the following, which are all applicable assets that should be included in an estate plan:
- Collectibles and valuables such as jewelry, trading cards, antiques, art, and coins
- Vehicles, including boats and motorcycles
- Real estate, including land and homes
- Savings accounts, checking accounts, and certificates of deposit (CDs)
- Investments, such as mutual funds, bonds, and stocks
- Life insurance policies
- Health savings accounts (HSA)
- Retirement plans
- Ownership stakes in a business
Exactly how you go about planning your estate will depend on your assets and how you want them dispersed. Common things to consider in your estate plan checklist include:
- A power of attorney
- A will
- Guardianship directions
- A trust
- Transfer on death (TOD) accounts or deeds
- Provisions for pets
- Beneficiary designations on retirement, insurance, and other applicable accounts
Do you need a will?
A complete estate plan often includes a will. Is it advised to work with an attorney to create a will and keep it updated. Without a will, the laws of the state you reside in at the time of your death will determine how your assets are distributed.
If you have minor children, a will allows you to share your choices pertaining to who will get custody of them. If you have adult children, a will gives you the ability to leave clear instructions regarding how you want your liabilities, debts and assets divided or paid off. Perhaps even more notable, it gives you the ability to name an executor. This is the person who will be responsible for making sure that the wishes you have for your estate are followed explicitly. It will also allow you to make financial arrangements for your pets, if applicable. Having these decisions laid out can ease the stress your loved ones will undoubtedly face following your death.
When should you begin estate planning?
If you own anything at all, have minor children, or even pets who depend on you for care, you should begin planning your estate as soon as possible. It’s a common misconception that you must wait until you are older to create an estate plan. You may consider creating one once you purchase a home, have children, or get married. In most cases, there is no downside to creating an estate plan at any point of your life. Consider your family’s needs when determining when to begin the process.
How do you choose an estate planner?
Generally, you should work with either a tax advisor or attorney (or ideally, both) to create a legally binding estate plan. An attorney can guide you through the process and ensure that your estate plan includes all applicable documents such as a will or power of attorney. A tax advisor can help you predict, and then plan for, any potential tax issues or tax implications associated with your estate.
Ideally, you should try to find an attorney who specializes in estate planning law. There are intricacies related to estate law that can be confusing and overwhelming. Any professional you trust to construct your estate plan should be one that understands the ins and outs of your specific state’s laws pertaining to estates.
Bottom Line: Contact a Professional Today
While most of us don’t like to think about death, it’s crucial to consider what will happen to your home, money, and other assets - not to mention your children or pets - after you die. An estate plan is one way you can help prepare for the inevitable and ensure that the loved ones you leave behind are protected and provided for as much as possible.