Planning for the event of your death may seem morbid, but it's an essential preparation for determining what happens to your things when you die or become otherwise incapacitated. Many wrongly assume that estate planning is not for them because they are not a millionaire or are still young. But estate planning helps protect your family and ensure your final wishes are carried out properly, regardless of your age or current financial situation.
If you've been wondering when your estate planning should begin, the answer is now. Keep reading to learn how to begin.
A comprehensive estate plan is far more than a will. Proper estate planning includes all the necessary forms to outline your wishes now and at the time of your death. The exact process and documents you need depend on your individual plan, net worth, whether or not you have children, and the state in which you reside. In general, estate planning should outline who can make legal, health, and financial decisions on your behalf if you become incapacitated, including who has legal guardianship of your young children and who receives your personal assets in the event of your passing.
If you're still not convinced that you should begin estate planning today, consider the following benefits:
While you should work with your attorney or trusted financial advisor to personalize your plan, below are a few things to consider prioritizing when you start your estate planning efforts.
A General Durable Power of Attorney allows you to select an individual who will have the legal power to act on your behalf if you cannot do so. This person can be anyone but is typically a spouse, close family member, or friend. The person you give power of attorney to will make financial decisions for you, including the ability to sell your assets or pay your bills. However, your document may limit or specify which particular actions they may have at their disposal.
Separate from your financial power of attorney, you will need to designate an individual to make healthcare decisions on your behalf if you are unable to do so. This should be someone you trust completely, as they might hold your very life in their hands. Be sure to assign someone who can carry out your wishes and pick a backup if your first choice is not available.
Because of increasing privacy laws surrounding medical records, you'll also need a Health Insurance Portability and Accountability Act (HIPAA) authorization form. This will give the person you selected to act as your health care power of attorney access to private medical information they may need to make treatment decisions on your behalf.
A will is a legal document that identifies how you want your financial and material assets distributed after your death. It can also designate guardians for your children and appoint how and when your beneficiaries will receive any inheritances. A will also assigns an executor to help administer your estate.
A trust is a legal entity, typically established by high-net-worth individuals, to protect their assets after death. A trust allows for more privacy and control, and in some cases, provides additional tax advantages.
Save your loved ones undue stress and confusion. Begin your estate planning following these five simple tips.
Estate planning can be complicated and includes several considerations for your health, assets, and dependents. Don't feel like you have to figure it all out on your own. Reach out to a financial advisor, tax professional, and estate planning attorney along the way to ensure you are covered on all fronts.
Use all the tools at your disposal to outline your wishes in the event of your death or incapacitation. This is especially important should your estate go into probate court following your death. The more carefully you specify using the right documents, including a letter of intent, living will, and last will and testament, the more likely your plan will be carried out how you intended.
If you have young children or other dependents unable to care for themselves in the event of your death, your estate plan must focus on who will care for them in your place. If you fail to do so, a court may end up deciding for you. Communicate ahead of time with chosen guardians. Make sure they consent to the responsibility.
Likewise, think through any financial responsibilities for caring for your dependents. Remember, the people you choose as guardians can be different from the person you choose to manage any money or assets left to support on-going care and financial needs.
For many, estate planning is a smart way to limit their benefices' tax burdens upon their death. Be sure to consider both the federal and state taxes that might be owed. Trusts may provide additional ways to minimize taxes. Consider working with an estate or tax attorney for advice on how to plan for your estate taxes.
Life happens, and circumstances change. Be sure to review your estate plan regularly, especially around larger life events such as a divorce or separation from a spouse. Performing a regular check-up on your documents will ensure that your affairs will be in order no matter what happens.
It's impossible to predict when your estate plan will be needed, so don't wait until it's too late to get started. Farther helps provide expert estate planning advice using technology that will make the process easy and stress-free. Check them out over at Farther.com to get started on your estate planning today!