More young Americans have been creating an estate plan due to recent world events. After all, you never know what’s going to happen.
Estate planning is the official process of arranging and anticipating what will happen in a person’s life if they are incapacitated or after their death. This involves passing down assets to heirs and planning for uncertainties to reduce taxes and other expenses.
Are you interested in estate planning, but don’t know where to start?
Here is everything you need to know about what is estate planning and how to maximize the value of your estate.
What Is Estate Planning?
Estate planning is the act of writing down everything you want to happen to all your assets and belongings after you die. You are legally documenting who you want to make all your financial and medical decisions during your lifetime, especially if you are too ill or incapacitated to make them by yourself.
What Is Involved in Estate Planning?
Your estate planning checklist may contain wills, trusts, durable power of attorneys for financial care, advance health care directives, beneficiary designations, as well as instructions on how to tie all of your assets to this estate plan.
These vary for each person. For example, a person living alone without dependents may have a simple estate plan compared to someone with multiple homes and children from different marriages.
By creating a formal plan, you can enforce valid documents and legally bind them to determine what happens to all your assets.
This is helpful for your family by not putting all the burden on them to make these decisions. They can grieve your loss instead of quarreling over who gets what without your instructions.
This is a process to protect and care for your loved ones. By creating these documents, you ensure that they will always be supported even after you are gone. If you do not make these decisions, a system of laws will make them for you.
State intestacy law can decide who gets to have your assets. Then a court can appoint a conservator of their choice to control and manage your finances if you are incapacitated.
The state law can then let your spouse have all the authority to make medical decisions on your behalf if you are hospitalized after an accident. Although these laws seem fair, they do not take your personal wishes into consideration.
The decisions made by the court may not adhere to your beliefs and family’s needs the way you want. Therefore, it is necessary to get in touch with an estate planning attorney to start the process before it is too late.
Some aspects of estate planning are quite straightforward. For instance, if you own a checking account, you have a right to decide who should inherit your bank balance after your passing.
You will need to state this in your estate plan. However, you can also fill out a form at your bank. This is known as a pay on death or transfer on death designation, depending on the type of account.
On this form, you will need to write down your full name, birth date, and your relationship with the person you want your money transferred to. You should also name a beneficiary or even a backup to inherit your account if the person you stated first dies before you.
If you want the money transferred to multiple people, you can name more beneficiaries by choosing how much percentage each person should inherit. Your other accounts can also go through the same process of beneficiary designations.
Your retirement accounts and life insurance policies will also need a beneficiary. Your retirement account company and/or insurance company should have already asked you to name primary and contingent beneficiaries.
However, if a lot of time has passed, your choices may have changed. Estate planning gives another chance to name different beneficiaries.
Writing a Will
Writing a will can initially be an inexpensive process, but requires more work to be complete upon your passing. You will need to check the requirements for each state to go through the guidelines. It is always best to work with an estate planning lawyer.
After your death, your estate’s executor can proceed to take your will to court where it will enter probate. This is a court-supervised act to declare your will’s validity. Your creditors and taxes will be repaid, and the remaining assets and funds will be given to your heirs.
Depending on the state, if the estate exceeds a certain amount, it will enter probate. This is a court-supervised act to declare your will’s validity. Your creditors and taxes will be repaid, and the remaining assets and funds will be given to your heirs.
Without probate, it would take a long time before your loved ones get their inheritance. If electing to use a Will, your Executor will also face all fees associated with the probate process, which vary from state to state.
If you choose to place your assets in a trust, they become legally owned by the trust. Then there is no need for probate proceedings. Your trustee will then distribute all your assets as instructed by you.
This is the quickest and most inexpensive process that also grants a lot of privacy.
Durable Powers of Attorney
Wills do not let people automatically make medical and financial decisions for you. You will need another power of attorney for each of these factors.
Your financial power of attorney will let someone make money-related decisions on your behalf if you are in hospital. They can pay your property taxes, mortgages, and bills with your money.
Always delegate this responsibility with care because many people can make unethical decisions regarding money. Pick someone you trust to carry out these duties truthfully.
Advance Health Care Directives
An advance health care directive is needed to state your wishes regarding life-sustaining medical treatments, especially if you wish to receive them or not.
This decision is too difficult for family members to make, so it is always beneficial to have an official document with your choice. This notarized document can guarantee that your final wishes will be honored.
Contact an Estate Planning Attorney
Having all these documents can be a daunting experience, which is why you should get in touch with an estate planning lawyer.
Contact us for more information about what is estate planning, and we can help accomplish all your goals.