An estate plan ensures that your assets and responsibilities will be properly handled after you pass on. Although it’s often difficult to talk about, establishing a plan is essential in ensuring your loved ones will be taken care of after you are gone. An effective estate plan will decrease your loved ones’ stress in the wake of your passing, minimize the effect of taxes, and ensure that they receive exactly what you want them to.
As you create your estate plan with a trusted medical financial advisor, be sure to consider the following aspects:
Think About Your Family
One of the most important parts of an estate plan is establishing a guardian for your children should you pass on while they are still living at home. Don’t just assume that your family or the court will abide by your wishes; be direct about what your goals are for your children’s care. A lack of doing so could result in the draining of your assets during court fights, as well as hard feelings between family members during an already difficult time.
Additionally, designate beneficiaries where applicable. This typically applies to retirement plans, IRAs, and life insurance. Take inventory of your assets and decide how and to whom you will allocate them.
If you have minor or young adult children, consider establishing a revocable living trust so you can dictate how and when your heirs receive the money. Inheriting money too early in life can destroy motivations, warp financial discipline, or create destructive habits.
As you create your estate plan, it is essential to understand the principle of probate. Probate is the process in which the court officially approves the will of a deceased person. This process can be both lengthy and expensive. During probate, the court will affirm the will’s validity, appoint a person to act as fiduciary during the interim, deal with creditors against the estate, distribute assets to designated beneficiaries, and, then, close up the estate record.
Although probate can be long, planning ahead will speed up the process considerably. Make sure there are records for locations and values for all of your assets that are known to your personal representative or trustee, or are at least easy to find once you pass on.
The surest way to speed up the probate process, or to avoid it altogether, is to own your significant taxable assets in a living revocable trust. Assets owned by the trust won’t be required to go through probate.
These are just a few ways to speed up the process of probate. Your financial planner can supply you with more ideas and ensure that you have a plan to make probate quick and effective.
Plan for Incapacity
Many do not realize that estate planning does not only encompass what will happen to your estate after your death, but it also covers the care of your estate should you ever become incapacitated. If an unfortunate event like this occurs, you must be prepared.
Make a plan for who will make important healthcare and financial decisions if you are ever incapacitated. This is typically done through a Financial Power of Attorney and a Healthcare Directive and should be standard with any estate plan.
Understand Tax Implications
The amount your estate will be taxed at depends on several factors, the most noteworthy being the size of your estate and where you live. Up to $11.4 million of an estate, per person, is exempt from federal taxes (in 2019), but if your estate is larger, you will have to plan for estate taxes on the federal level. When it comes to state tax, laws will vary from state to state. Learn the tax laws for your specific area so that you can adequately plan for them. A financial planner can ensure that you are mitigating these taxes as much as possible.
Work with a Professional
Working with a professional financial advisor is essential throughout the process of estate planning, especially if you have a large estate and diverse assets. They will help you find an estate planning attorney, assist in the transfer of assets, and ensure that your estate plan is aligned with your personal financial goals.
Perhaps most importantly, an advisor will assist in monitoring and modifying your plan as necessary. The only constant in life is change. As new life situations arise, your advisor will assist in adjusting your plans.
Let Boise’s best estate planning firm be your guide through this process. Contact us today to learn more!