How To Plan an Estate.
What is Estate Planning?
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Take care of your family by making a will, power of attorney, living will, funeral arrangements, etc. Accordingly, estate planning is the preparation of tasks that serve to manage an individual’s asset base in the event of their incapacitation or death. Notwithstanding, estate planning includes the bequest of assets to heirs and the settlement of estate taxes. Consequently, most estate plans are set up with the help of an attorney experienced in estate law.
Main Points of Estate Planning Interests:
• Estate planning involves utilizing Wills, Trusts, and More to determine how an individual’s assets will be preserved, managed, and distributed after death or if they become incapacitated.
• Planning tasks include making a will, setting up trusts, making charitable donations to limit estate taxes, naming an executor and beneficiaries, and setting up funeral arrangements.
• A will is a legal document that provides instructions on how an individual’s property and custody of minor children should be handled after death.
• Various strategies can limit taxes on an estate, from creating trusts to making charitable donations.
Nevertheless, you may have heard that you need to make an “estate plan,” but what does an estate plan cover, and how do to make one? Here is a simple list of the most crucial estate planning issues. Ordinarily, assets that could make up an individual’s estate include houses, cars, stocks, artwork, life insurance, pensions, and debt. Individuals have various reasons for planning an estate, such as preserving family wealth, providing for a surviving spouse and children, funding children’s or grandchildren’s education, or leaving their legacy behind for a charitable cause.
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- Make a will.
In a will, you state whom you want to inherit your property and name a guardian to care for your young children should something happen to you and the other parent.
- Consider a trust.
Hold your property in a living trust. Your survivors won’t have to go through probate court, a time-consuming and expensive process.
- Make health care directives.
Writing out your wishes for health care can protect you if you cannot make medical decisions for yourself. Health care directives include a health care declaration (“living will”) and a power of attorney for health care, which gives someone you choose the ability to make decisions if you can’t. (In some states, these documents are combined into one, called an advance health care directive.)
- Make a financial power of attorney.
With a durable power of attorney for finances, you can give a trusted person authority to handle your finances and property if you become incapacitated and unable to handle your affairs. The person you name to handle your finances is your agent or attorney-in-fact (but doesn’t have to be an attorney).
- Protect your children’s property.
It would be best if you named an adult to manage any money and property your minor children may inherit from you. This can be the same person as the personal guardian you name in your will.
- File beneficiary forms.
Naming a beneficiary for bank accounts and retirement plans makes the account automatically “payable on death” to your beneficiary. It allows the funds to skip the probate process. Likewise, in almost all states, you can register your stocks, bonds, or brokerage accounts to transfer to your beneficiary upon your death.
- Consider life insurance.
Life insurance may be a good idea if you have young children or own a house, or you may owe significant debts or estate tax when you die.
- Understand estate taxes.
The overwhelming majority of estates won’t owe federal estate taxes. For deaths in 2022, the federal government will impose estate tax at your end only if your taxable estate is worth more than $12.06 million. (This exemption amount rises each year to adjust for inflation.) Also, married couples can transfer up to twice the exempt amount tax-free. All assets left to a spouse (as long as the spouse is a U.S. citizen) or tax-exempt charity are exempt from the tax.
- Cover funeral expenses.
Rather than a funeral prepayment plan, which may be unreliable, you can set up a payable-on-death account at your bank and deposit funds to pay for your funeral and related expenses.
- Make final arrangements.
Make your end-of-life wishes known regarding organ and body donation and disposition of your body—burial or cremation.
- Protect your business.
If you’re the sole owner of a business, you should have a succession plan. You should have a buyout agreement if you own a business with others.
- Store your documents.
Your attorney-in-fact or your executor (the person you choose in your will to administer your property after you die) may need access to the following documents:
• insurance policies
• real estate deeds
• certificates for stocks, bonds, annuities
• information on bank accounts, mutual funds, and safe deposit boxes
• information on retirement plans, 401(k) accounts, or IRAs
• information on debts: credit cards, mortgages and loans, utilities, and unpaid taxes
• information on funeral prepayment plans and final arrangements instructions you have made.
• Keeping your documents organized will be a great help to your survivors.
Estate planning is ongoing and should be started as soon as an individual has any measurable asset base. As life progresses and goals shift, the estate plan should change in line with new goals. Conversely, a lack of adequate estate planning can cause undue financial burdens to loved ones (estate taxes can run as high as 40%), so at the very least, a will should be set up, even if the taxable estate is not significant. It will take some effort to revise your plan, but take heart. The need to adjust means you’ve already avoided the most significant estate planning mistake: never drafting a plan.