If you are like most people, estate planning isn’t something you think about regularly. But there’s no getting around the fact that death can happen at any time, and it’s important to have your affairs in order just in case it happens to you unexpectedly. No one wants to think about dying, but if you want your loved ones to be able to move on with their lives without facing unnecessary legal hassles, it’s worth taking the time to get your estate in order beforehand.
If you don’t have an estate plan in place, you are leaving the details of your last wishes to chance. Take a look at this list of the basics of estate planning and think about what you might want to consider before it’s too late to make these decisions for yourself.
Itemize Your Inventory
Before making any decisions about how to distribute your estate, it’s important to understand what you have to start with. Make an inventory of all your assets, including property, savings and retirement accounts, investments, and personal possessions. It will help ensure that your heirs inherit everything they are entitled to. To protect privacy while helping prevent tax problems and mistakes in titling property at death, hold off on sharing that list until before death.
Have a Testament
Having a will in place is a critical part of your overall estate plan. It allows you to pass assets on to your loved ones. Without one, it can be difficult for heirs and family members to locate specific documents necessary to settle an estate. A last will and testament can also serve as an emergency trust fund, allowing money from life insurance policies, 401(k)s, or IRAs to continue providing for your loved ones after death.
Consider Doing a Living Trust
Most people opt for a will to manage their assets upon death, but that’s not always ideal. A living trust lets you transfer control of your assets from your will to an independent trustee. Upon your death, your property transfers automatically without needing probate court approval. It also helps keep certain information private depending on how it’s set up.
Think About Probate vs. Non-Probate Assets
The two main types of assets are subject to probate, and some aren’t. The difference has everything to do with who gets to administer them after your death-if they go through probate or not. By transferring non-probate assets, such as life insurance, into a living trust before death, their management is overseen by a designated successor trustee during your lifetime, which is usually easier than navigating probate upon your passing. On top of helping to simplify administration after you die, transferring these items into a trust can help avoid taxes or fees on their transfer back to family members.
Protect Yourself With Insurance
One of your goals with an estate plan is to ensure that your wishes are carried out, but if you don’t have life insurance to provide for your family in case something happens to you, no amount of planning will matter. While it can be daunting to consider how much coverage might be needed for long-term care or other expenses not covered by your will, it’s critical to at least discuss these issues with a financial planner or attorney.
Establish Your Directives
Estate planning involves far more than just a will. It is often one of the first steps to prepare for their death, but rarely sufficient. An estate plan involves drafting a will and setting up trusts to ensure your wealth is distributed as you wish. Consider what types of assets you want to be included in an estate plan. Do you own property? Do you have stocks or investments? Who would serve as trustee or executor? How much can they handle? These are important considerations that must be addressed before signing off on an official will.
Name an Executor
Choosing an executor for your will is a must, as they’ll be responsible for seeing that your wishes are carried out after your death. But make sure to choose someone who shares your values and can see eye-to-eye with other decision-makers in your life, as any conflict could cause a rift among family members. You’ll also want to have backup executors in case anything happens to your first choice.
Get an Attorney
Before anything else, talk to an attorney. Even if you’re familiar with legal matters, hiring a lawyer will be crucial to writing your estate plan. A lawyer can ensure that all of your bases are covered and that your wishes are carried out according to law. You can generate a lawyer email list online, searchable by speciality and location. You can find local attorneys or those who specialize in tax laws, etc.
The Bottom Line
Estate planning is a valuable exercise because it enables people to pass their assets onto those they love and protects them against financial mismanagement by relatives. It is also essential for anyone with major debts, such as mortgages or loans, because it ensures that these debts do not prevent your beneficiaries from inheriting your assets after you die.