Most people don’t like talking about end-of-life topics like estate planning. While it may be uncomfortable to talk or think of the ‘ifs’ of not being around someday, estate planning is critical for your overall financial plan. After all, an estate plan is all about making sure that your investments, assets, and wealth are handed down to your family in the most effective way possible.
Creating an estate plan can be complicated and comes with numerous considerations. To help you get started, here are five estate planning tips to protect your assets and family when you pass away:
1. Assemble Your A-Team
Estate planning is a complex process. Unless you have a background in key areas such as estate tax and relevant laws, you shouldn’t try to go the DIY route. This is particularly true if you have complex assets, have more complicated bequests, or think that it may cause disputes among beneficiaries.
So, make it a priority to assemble a knowledgeable and experienced team to create your estate plan. First on your list should be a reputable law firm that specializes in estate planning like Two Spruce Law P.C. and others. They can help you with everything about estate laws as well as potential legal challenges and scenarios that may occur.
In addition to a reputable estate planning lawyer, collaborate with a tax professional and financial advisor to map out a complete estate plan that’s fully customized for you.
Each expert plays a crucial role in the estate planning process, providing invaluable financial and legal advice. By working with a team, you can easily navigate the complexities of estate planning and maximize your plan.
2. Prepare The Necessary Documents
Your estate plan should outline your wishes regarding your assets and beneficiaries at the time of your death. And you can do that by drafting the necessary documents, which include:
A will is one of the primary documents you need in your estate plan. Regardless of the size of your estate or your marital status, you need to have a will. A well-made will outlines who gets what when you die.
In addition to asset distribution instructions, a will should also name someone to care for your kids if both you and your spouse die before the child reaches 19. Furthermore, children less than 18 years old can’t own properties and assets, so you should also name a guardian to manage their inheritance until then.
If your financial situation is straightforward, a will may be enough for your estate plan. For instance, if you’ve never been married nor had kids, have a few investments and assets as well as plan to leave everything to your sibling or a close relative. In this case, a will should be enough.
Trust is almost similar to a will. However, trusts are more comprehensive than will. It describes exactly when and how your assets will be distributed after your death. It’s often used in combination with a will to help avoid the probate process, minimize taxes, and name a guardian for your children.
Powers Of Attorney
Other than planning for the distribution of your assets and assigning a guardian for your kids after your death, you may also need to plan for what will happen in case you become unable to make the decisions for yourself. In this case, a power of attorney should provide the necessary instructions.
There are several types of power of attorney. For one, a financial power of attorney appoints someone to manage your finances if you become incapacitated. Meanwhile, a healthcare power of attorney assigns someone to make healthcare decisions if you’re unable to communicate your wishes. A living will outlines your specific wish for any life-sustaining treatments, including a ‘Do Not Resuscitate’ (DNR) form.
In general, your healthcare power of attorney and living will is often combined and known collectively as ‘healthcare directives’ or ‘advance directives’.
3. Talk To Your Beneficiaries And Loved Ones
To avoid confusion and surprises later on, you need to have regular talks about your current estate plan with your beneficiaries and loved ones, as well as anyone involved in carrying out your wishes such as your agents and executors of any of your plans.
In addition to the contents of your wills and other plans, you need to make sure that everyone knows the location of any important medical, personal, and financial documents.
4. Don’t Forget About Your Digital Assets
Most people tend to focus more on physical assets and belongings during an estate planning process. However, as the world becomes more digital, you probably have a digital footprint that needs to be processed after your death.
You probably have important documents in your email, treasured photos saved in your social media accounts, digital investments such as crypto and stock, and online banking accounts. Make sure to include these assets in your estate plan, outlining how you’d like these to be handled after you pass away.
In general, most service providers may not disclose a deceased person’s credentials and there are few laws to help in this case. To reduce the risk of your loved ones losing access to important documents and treasured memories, you need to assign a ‘digital fiduciary’ to your estate plan. They’ll have the right to access all digital information you provide, including login credentials. Also, you can work with a lawyer to remove your online presence if that’s what you want.
5. Always Update Your Plan
Most people set up an estate plan and forget it completely. That said, as your life changes, so should your estate plan and its corresponding documents, assets, and beneficiaries. An outdated estate plan won’t work as intended and can be worthless in the future.
In general, you want to update your estate plan during significant life events such as marriage, divorce, having kids, retiring or switching jobs, moving, getting new assets, or changing your financial situation.
Estate plans are a crucial part of your end-of-life plan and should never be neglected regardless of how busy you are in life or uncomfortable with this topic. Without a proper plan in place, confusion and problems may arise after your death, causing added emotional stress for your family.
While there are a lot of things you need to do for your estate plan, the above tips should help you get started and streamline the whole process. This way, you can protect your assets and ensure that your heirs and family can thrive even after you’re gone.