Have you ever wanted to make life harder than it needed to be for your family and friends? Do you imagine a day when your spouse and children have to anxiously sort out your finances? These are a few questions Suze Orman asks to those who have yet to start or finish their estate plan.
Of course the answer to the above questions is “No,” but if you are like most American’s without a complete estate plan, then these questions could become a reality. If you don’t have a Will in place, the state in which you reside will determine how your property is distributed when you die– regardless of what you told or promised your spouse. If you pass away with only a Will, then a probate is necessary. When all of the costs are totaled, a probate can cost from 3-7% of the total estate value.
Estate planning can be seen as unimportant, irrelevant or daunting to some but when you start to see it as your duty to protect those you love, then setting up an estate plan isn’t so bad.
Below are Six Essential Parts to Your Estate Plan
1. Create a Will
A Will lets you provide instructions for the distribution of your assets to family and other beneficiaries. A Will allows you to carefully distribute non-investment possessions like jewelry or antiques that your great-uncle collected.
You will also appoint someone to be the executor to pay the final taxes and expenses and then distribute the funds, as you desired. If you have young children, a Will can state who will become their guardian.
2. Create a Revocable Living Trust
Contrary to popular belief, trusts are not just for the wealthy. Most people use living trusts to avoid probate and to stay in complete control of their finances while they are still alive. It’s a step that can often be overlooked when setting up your estate plan. By placing your assets into a trust, you are able to reduce estate and gift taxes and also minimize the time it takes to distribute your gifts.
3. Power of Attorney
A power of attorney is designated to help you handle all of your business and health-care decisions should you become incapacitated. This legal document allows you to appoint someone, who you trust, to act on your behalf. Your agent can sign your name, pay your bills, manage your investments and is obligated to be your fiduciary. If you wish to have your finances handled in a certain way after you can no longer make decisions, then a durable power of attorney must be specified. A traditional power of attorney will terminate upon disability or death while a durable power of attorney continues during incapacity.
4. Update Your Will
You should review your Will about once a year. Furthermore, after a major life event such as a birth, marriage, divorce, death or if you buy some real estate, a review of your Will should be order. By keeping it up-to-date you can ensure that your estate plan is exactly what it should be.
5. Assign Healthcare Power of Attorney
A healthcare power attorney will allow someone to make medical decisions for you in the event you are unable to do so yourself. Your healthcare power of attorney should be able to understand medical treatment of your condition, be able to make tough decisions, and keep your wishes in mind. This document is extremely helpful in avoiding family conflicts and even court intervention.
6. Put Together a List of All Your Assets and Where They’re Located
It’s easy to forget passwords, security codes and banking information. Creating a form does not take long and is very helpful when you need to locate something in a time of need. List a contact person for each account and include all login information. While this may seem redundant, it is an often-overlooked step of having an organized estate plan.
Are Your Affairs in Order?
If you have any additional questions about estate planning or would like to schedule a free review of your documents, please feel free to contact us at your earliest convenience.