Estate planning should always be done sooner rather than later in order to make sure your wishes are kept. Lack of planning for your estate can cause emotional stress to your family if your end of life wishes are unclear. Here are tips for offering detailed instructions on what happens to your assets, guardianship of your children, and trusts.
If you have a team that includes a tax professional, estate planning attorney, and a financial advisor, you can easily map out a detailed estate plan that is customized to your needs. Each of these professionals has a crucial role to play in ensuring that your assets are distributed to the people or organizations you want and that your instructions are carried out precisely.
The estate plan must clearly state what you would like to happen to your possessions and assets upon your death to avoid having the state make decisions for you. The family estate plan must include:
You should name someone to take care of your minor children or dependents with special needs, or a judge will have to appoint one on your behalf. Talk to the appointed guardian and get their consent ahead of time. Remember that the guardian is not necessarily the person who manages the money that you leave for your dependent’s benefit. It is generally not a good idea to name a married couple as co-guardians to avoid complications if the couple divorces. An estate planning lawyer will advise you on how to prepare for this possibility.
You could consider a trust to be a container that holds money for your heirs. You get to choose what assets to put into your trust, how it is distributed and who benefits. A properly structured trust offers asset protection, helps in tax planning, keeps details of assets and beneficiaries private, and ensures assets stay within your family if you wish.
If you have an estate that is subject to federal taxes, you should be aware that they are usually due within nine months of death and payable in cash. This could be a problem if a large part of your estate is not readily available in cash, and could force your heirs to sell assets that you may have wanted them to inherit. Additionally, there is a little-known tax called Income in Respect of a Decedent (IRD). If you pass away and leave untaxed income, your heirs must pay income tax on the money. A tax professional will help you craft an estate plan that covers all possible tax scenarios.
Let’s suppose that you or your partner need expensive and lengthy-term care before passing on. The cost of this care will eat into the assets you want to leave behind for your heirs. In this case, a financial advisor will give you investment and savings options that will preserve your assets while handling the costs of your long-term care. Ensure that you discuss all the options and have several plans to protect you and your dependents if your health changes.
One commonly overlooked loophole when making an estate plan is: If you have any money in accounts that have named beneficiaries, the funds will be given to the indicated people, even if you have an estate plan that says otherwise. This may include life insurance, your 401(k), transfer-on-death accounts, and pay-on-death accounts. To avoid this, ensure that all designated beneficiaries of your financial accounts are in line with your estate plan so that there are no conflicts.
Estate planning is complicated and emotional. However, you should start early to better prepare your family to face challenging situations when you are gone. Your estate planning lawyer or wealth advisor will advise you before you make any significant decisions.
Katie earned a BA in English from WWU and loves to write. She also adores hiking in redwood forests and photography. She feels happiest around a campfire surrounded by friends and family.