September 7 2019 - Everyone dies eventually. However, not everyone plans their estate before their death. In fact, it's estimated that 60 percent of Americans do not have an estate plan or will in place.
Oftentimes, this is because people don't fully understand the importance of estate planning.
Estate planning is about a lot more than just drafting a will. By planning your estate, you ensure that your friends and family are taken care of after your death and that your assets are distributed in the way you wish.
Another reason people avoid estate planning is that they see it as a big, daunting task. However, if you know the estate planning basics, the process is not as difficult as you think.
So, what do you need to know when it comes to planning your estate?
Check out this guide to learn about the top estate planning tips that everyone needs to know.
1. Create and Review Your Will
First things first, you need to create and review your will.
If you've already created your will, then you're one step ahead of the game. However, it's important to keep in mind that estate planning is not a one-and-done thing.
Due to life changes, writing your will should be viewed as an ongoing process. In general, you should review your will every 5 years. You should also review it whenever there's a significant change in your life, such as:
- The birth of a child/grandchild
- A significant financial loss or gain
- The loss of a spouse or other family member
Your will ensures that your property is distributed according to your wishes, so it's very important to review your will on a continual basis.
2. Create a Trust
For many people, the word trust conjures up images of rich celebrities and families with old money.
However, the truth is that anyone can create a trust. And, there are a lot of benefits that come with creating one. A trust allows you to pass on your assets to your heirs and beneficiaries. But, it allows you to do so without going through probate.
This makes the process of creating and passing on a trust a lot less time-consuming and costly. Also, probate opens up your financial affairs to the general public, whereas a trust keeps it private.
3. Draft a Durable Power of Attorney
Drafting a durable power of attorney is another very important aspect of estate planning.
By giving someone the power of attorney, you give them the right to act on your behalf if you are unable to do so yourself. If you don't draft a durable power of your attorney, the court may be able to decide what happens to your assets.
Seeing as the court's decision may not be the one you want, it's very important to give someone you trust the power of attorney.
4. Designate a Healthcare Power of Attorney
In addition to designated a durable power of attorney, you should also designate a healthcare power of attorney.
A healthcare power of attorney designates someone you trust (typically a spouse or family member) to make decisions on your behalf regarding your healthcare if you don't have the capacity to do so yourself.
The person you designate as a healthcare power of attorney could literally have your life in their hands, so it's very important that you choose this person wisely.
5. Designate Guardianship
For those with children under the age of 18, designating guardianship is very important.
Make sure the individual or couple you choose shares.
It's also smart to name a backup guardian in the event that the primary guardian is unable to take care of your children.
6. Name a BeneficiaryIf you don't want a court to decide the fate of your funds, it's very important to name a beneficiary. By naming a beneficiary, you're guaranteeing that your possessions are passed down in the way you wish.
A beneficiary also allows your funds to skip the probate process. Also, almost every state allows you to transfer your bonds, brokerage accounts, and stocks to your beneficiary upon your death.
7. Write a Letter of Intent
Once you've named a beneficiary, it's also very important to write a letter of intent.
A letter of intent allows you to clearly spell out what you want to be done with your assets upon your death. The letter can also include any special requests you have and funeral arrangement details.
If your will is for some reason deemed invalid, this letter will help clarify how you want your assets distributed.
8. Sit Down With an Attorney to Go Over Your Estate Plan
Even if you've crossed every T and dotted every I on your estate plan, it's still important to sit down with a will attorney to make sure you did everything right.
Planning your estate is a very complicated process. If you attempt to plan your estate all on your own, there's a good chance that you'll overlook something or make a mistake.
These mistakes could have a huge impact on the future of your family, which is why it's important to play it safe and hire an attorney.
Every state has its own laws when it comes to estate planning. If you fail to follow the laws of the state you reside in, there's a strong chance that the court will declare your will as invalid.
If this happens, your estate will not be distributed according to your wishes, but rather by the laws of the states.
Estate Planning Basics: Are You Ready to Plan Your Estate?
With these tips in mind, it will be much easier to plan your estate.
Also, be sure to check back in with our blog for more tips and tricks for planning your life.