“It’s never too early to start working on how your things will be handled, once you pass away.”
Estate planning is an all-encompassing term that refers to the entire process of gathering and organizing assets and making preparations for when you die, including caring for minor children and heirs. It also includes putting protections into place, if you should become incapacitated, says an article that covers estate planning basics from c|net titled “Estate planning 101: Your guide to wills, trusts and all your end-of-life documents“. Your estate plan involves writing a will, power of attorney and funeral arrangements. Here are some of the key steps:
- Distributing assets. Your estate includes more than just real estate. It includes everything you own, including your car, jewelry, sentimental belongings and intangible assets like investments and insurance. If you own a business, that is also part of your estate.
- Preparing for family life without you. An estate plan sets out how you want to care for loved ones. A will is used to name a guardian for minor children, and to name someone to be in charge of their finances. One person can have both roles, but it is generally advised to name one person for each role. If you fail to name a guardian, the court will select one for your children.
- Assign the tasks of handling the estate or your health, if you are incapacitated. An estate plan includes a medical power of attorney, called a health care proxy in many states, and a financial power of attorney, so decisions can be made on your behalf if you are incapacitated. You also will name an executor – this is the person in charge of following the directions you leave in your will and distributing assets. Depending on your estate, the person may also be in charge of selling your home, negotiating with creditors, or managing the sale of your business. It is a big responsibility and requires someone who is organized and trustworthy.
- Work with an estate planning attorney. An estate planning lawyer will save you a lot of time, energy and effort in creating an estate plan. The attorney will also be able to help you take into account estate, inheritance and gift taxes to minimize the impact of federal and state tax laws on your beneficiaries.
- Document everything properly. Just stating your wishes will not solve anything. You need an estate plan with all of the right documents, prepared in accordance with the laws of your state. An invalid will could create just as many problems as no will at all. You will need a last will and testament to appoint an executor, outline how you want assets to be distributed after your death and see your will through the probate process.
If you want to avoid probate court, you may want your estate plan to include a trust. A “funded” revocable trust can be adjusted while you are living. When you die, the trust is managed by trustees whom you select.
In some states, a living will can be used to detail your healthcare preferences in case you are not able to communicate or make decisions on your own. If you require life support, or life saving measures, the living will specifically outlines what you want to have done—or not done—rather than having children or relatives guess at your wishes.
Having an estate plan is not a set-it-and-forget-it plan. As you proceed through life, getting married, having children, divorcing, buying property, etc., the estate planning documents need to be revised, so they continue to reflect your wishes. Whenever there are big changes to the law, you may also need to revise your estate planning documents so you don’t miss out on any planning opportunities.
Reference: c|net (June 8, 2020) “Estate planning 101: Your guide to wills, trusts and all your end-of-life documents”
