When you have built your life’s wealth and pride up over the years and want to share it with those you love, it has to be managed carefully through estate planning. You don’t want to make mistakes and accidentally leave nothing behind for a dear family member. For example, if taxes weren’t already previously covered by you they will have to be taken out on the property you planned for your family member, and they wouldn’t be able to enjoy what you gifted them. For these uncertain and unplanned circumstances, executing an estate planning process will work to your best benefit.
The Estate Planning Process
With all the paperwork required, estate planning can seem daunting. Here are some easy-to-follow steps that will make your estate planning a far easier process.
Begin the Property Inventory
When you are structuring your estate, you have to take note of both tangible and intangible economic assets that you own. Separating them into two categories can help you account for them all. Items that you can include on your list of economic items cover any real estate property such as homes, land, and even commercial properties. Also, automobiles, motorcycles, and other devices such as boats or private jets need to be included. Personal possessions can be vast, such as artwork, machinery, expensive furniture, and more. Anything that is collectible is on this list, which includes coins, antiques, trading cards, and more. Think of all the things that have value in your life that are still sellable on the market. Whatever holds physical value should be included on this list.
Next, think of all the intangible assets that you own for your estate. This can include life insurance policies and health savings accounts. If you own a business, this also should be counted as an intangible asset, especially if it is an online or e-commerce business. You must also include mutual funds, stocks, and bonds as they are of high economic value. Retirement plans belong to this category and can include individual retirement accounts and other popular plans such as 401(k) accounts. Certificates of deposits, checking, and savings accounts should be added to this list too.
Commonly, you might not know the full value of your assets, and in this case, you can get in touch with an appraiser. Having an up-to-date appraisal of your home or antiques can help prevent distress later down the road.
Identify Family Needs
Another aspect of estate planning is making sure your family members are well situated as beneficiaries so that they are financially sustained despite your absence. Think about what can happen if your children are without you, and what their needs would be. If they are minors, they would need a designated guardian. You need to assign a close friend or family member as guardian in the unfortunate incident that you aren’t there for them. Take into account the costs it would be for the child’s daily life and estimate how much they would need to live comfortably. Know whether or not your life insurance can cover all aspects of their needs. This can play a part in estate planning as you may need to provide alternative funds for them.
Create Goals for Legal Directives
You will need a designated agent in the instance that you are medically incapacitated. This means that you must give a family member the power of attorney to manage financial affairs to help delegate your assets when you cannot access your finances. Giving an individual limited power of attorney can also be useful, where the representative can’t fully wield this authority. They would only be able to perform specific tasks under this title. In addition to these methods, having a medical care plan prepared for when you are unable to make these decisions is important. This way, you’ve already made the health decisions you desired for yourself and it is documented, where family members know in advance what to do. Creating a living trust when you sick or unable to make decisions can help with the appropriate transfer of assets when you need it most. This circumvents the probate process, making property distribution far simpler and straightforward.
Review Beneficiary List
It would be unfortunate that everyone on the list has their needs met, but one unlucky individual was left out of the plan or there weren’t enough finances to go around. Make sure that all the life insurance policies and retirement plans make sense and have the correct number of beneficiaries on them. Also, you must make sure that everyone that is accounted for will receive the correct items. If you were divorced, you need to be sure that your current spouse is on these accounts and not the ex-spouse. This can throw a terrible wrench in your financial planning.
Pay Attention to Taxes
Every state is different regarding tax fees, as some states require inheritance tax and others have estate taxes. This may be based upon the federal exemption amount. The federal-level of estate taxes only requires that estates over the amount of $11.7 million are taxed. Any estate beneath this amount doesn’t require taxes. However, double-checking the state requirements is key to avoiding unpleasant unpaid fees at a later date.
Keep Estates Updated
Estate planning has to be constantly revised year by year. An estate must be updated if someone passes away, if a child is born, if you are divorced or remarry, and other important life changes. Sometimes the state laws or federal laws change, where you have to plan accordingly and update any necessary terms. Every time your life circumstances change, or assets disappear or increase, you must include this as part of your estate.
Request Additional Guidance from a Professional
If you have any confusion or additional questions about the estate planning process, you can click here to find out more information. Obtaining additional knowledge and the help of an advisor can keep you on track with your estate planning. The additional complication of inheritance or other state taxes can be easily explained with the help of a professional. They may also include information you haven’t thought of. A licensed representative will know exactly how to plan an estate for your needs.