You may think you’re too young to think about estate planning; or maybe you think it’s not something you need to worry about yet, but the fact is, if you have any assets, you need an estate plan. As you acquire more assets, you’ll need an improved estate plan to make sure your loved ones are taken care of.
In many states, if you pass away without a will, the state will take your assets and let a court decide who should get what. That often takes several years, causing your family financial difficulties until it’s resolved. Here are the steps you should be taking to create an estate plan that will protect your family.
Make a will.
This is non-negotiable and has nothing to do with how much you have. A will directs who will inherit your property, how it will be divided, and if you have young children, it will name a guardian for them if your spouse has passed away as well. Whatever else you do or don’t do with your estate planning, get a will to protect your loved ones. You will also need to name an executor, the person who will handle the distribution of your property and filing tax returns on behalf of your estate. They will also handle any claims from creditors.
Consider a living trust.
You may or may not need a trust, but depending on your assets and the age of your heirs, you may want to consider it. A trust is allows you to put conditions on how and when your assets are to be distributed. For instance, you can state that your children don’t inherit until they are 25 with the exception of educational expenses.
Create a health care directive.
A living will helps you maintain control of the type of medical care you desire. For instance, if you are injured and have severe brain trauma and are declared brain dead, a living will helps the doctors know what you would want them to do for you. Would you want to be kept alive or would you want life support discontinued. In most states, without a health care directive, the doctors or the courts will make the decision which can take a long time, all the while racking up more hospital bills for your family.
Have a power of attorney drawn up.
This will protect your assets if you are incapacitated for a short period of time. If you should injure yourself and you’re unable to take care of your financial responsibilities for a short time, the POA will allow the person you direct to pay your bills from your account for you.
Write a letter.
Wills do not usually allow for funeral arrangements or other personal requests. Write a letter to your family letting them know your final wishes, like the type of funeral you would like, and give it to a trusted friend or keep it in a lock box with your will. Be sure to let someone know where it is.
Speak to a tax attorney or accountant.
Be sure you know the tax laws about inheritance and get professional help to ensure that your heirs will be able to avoid paying estate taxes.
File beneficiary forms.
Your bank and/or investment accounts should have a beneficiary form that you can fill out, designating who should receive the funds. This will allow your heirs to access those funds quicker, without having to go through probate. Many banks have a “pay on death” form that is similar to a beneficiary form which allows your heir to simply transfer the account holder to themselves.
Last, but not least, in this day and age you will also need to consider digital files. Keep a list of your accounts and passwords so your family will be able to easily access your online accounts and close them out without hassle.
Planning for your death is something we’d all prefer not to think about, but sooner or later, we will all pass away and isn’t it more comforting to know that your family will be taken care of.