If you are under the impression an estate plan is only for the very wealthy, that mistake can be costly to you and your loved ones. Or maybe you’re aware of the importance of estate planning and had your paperwork set up a few years ago. Either way, thanks to new tax laws that just went into effect, now is the time to either grab your favorite feather duster to dust off and review your docs, or start one of the most important steps you can take to make sure your final property and health care wishes are honored.
Estate planning is an often-neglected part of financial planning. It’s easy to put off answering uncomfortable questions like, “What happens to my assets, belongings and loved ones when I die?”
It’s not surprising that around half of Americans don’t have a will, and even fewer have an estate plan. You’re not alone if you are wondering what an estate plan is and how it differs from a will. While a will is a relatively simple legal document that sets forth your wishes regarding the distribution of property, an estate plan goes much further than a will, dealing with the distribution of assets and legacy wishes – as well as helping you and your heirs pay substantially less in taxes, fees, and court costs.
So, where is the best place to start when considering setting up an estate plan or reviewing your current one? We’ve compiled the key elements of a solid plan:
1) Update your beneficiaries
Life changes are inevitable, and out-of-date beneficiary designations are a common and costly mistake. Make sure your beneficiaries are all updated and include a transferable or payable-on-death designation for all your estate property and accounts that do not pass via a will like vehicles and boats.
2) Update your will
Your will is like a car. It needs regular maintenance to stay in good working order. It should reflect your changing life and circumstances. If your will is not updated this can create animosity and confusion for your family.
3) Designate an executor
When dealing with end of life issues, people understandably get overwhelmed. It is important to choose carefully and approach the decision after reasonable consideration of a number of common factors. Declare who is handling your estate and then organize it all. Keep everything together so it is easy to let your executor, spouse, kids, and grandkids know where everything is held and where to find it.
4) Communicate with your spouse
Estate planning is all about strategy, leaving the right assets and inheritances to the right beneficiaries. Many times married couples run into conflicting intentions because each spouse has different objectives for their estate. It is important to have open and honest communication as decisions are made on beneficiaries, executors, and the disposition of property.
5) Be specific
When dealing with heirlooms or investments, be specific on who gets what and make sure this is updated frequently. It is up to you to decide exactly who will benefit from your estate and to what extent. Specificity eliminates guesswork on the part of your loved ones.
6) Don’t wait
It’s never too early to start – it doesn’t matter if you’re 18 or 98. If you are reading this, the time to start is NOW. Especially if you have a house and mortgage, children, and any other assets, you need to start getting a plan in place.
7) Funding your trust
Once you set up your trust, you have to fund it. Funding your trust is the process of transferring your assets from you to your trust. It is important to make sure the trust is the owner if you have established a trust as part of your estate plan.
When it comes to estate planning, you can be under prepared but never over prepared. Benjamin Franklin’s quote “In this world nothing can be said to be certain, except death and taxes” reminds us when it comes to life, no one is getting out alive. But while there is certainty with death, there is no reason to be under prepared. And while there are multiple reasons to update your estate plan, you should always follow the law when changing your wishes.
What’s the best way to ensure that happens? Simply contact us to discuss the details of your estate planning so we can make sure the right person gets that favorite feather duster.
