We work hard to build wealth in this lifetime, not only for ourselves but also to pass on that wealth to the next generation. That being said, planning ahead and making arrangements for your final days can help save your family from a tremendous amount of trouble, especially when you’re no longer around.
While nothing can beat expert estate planning advice from experienced professionals, these smart estate planning strategies will get you started on the right track.
Write A Will
Should you pass away without a will, the state, through intestacy, gets to decide how to split up your estate among your survivors. If your only survivors are your minor children, the court may also appoint the legal guardian and, in a way, determine your kids’ future.
Thus, the will is a crucial part of estate planning, and it’s not only for those who have millions in assets. Wills are not only for naming heirs and who receives what part of your estate. You can also use it to appoint a guardian for your underage children.
While some people take the DIY approach when creating their will, remember that estate laws are quite complex. Consider having your will professionally drafted, and make sure to update these documents periodically.
Purchase Life Insurance
It’s one thing to make money and accumulate possessions; it’s yet another to protect these assets and free your successors from financial woes in the event of your passing.
Life insurance is a valuable yet often underrated as an estate-planning tool. Unless you have no one to support, you’ll want to purchase enough coverage to provide the needs of your family when you can’t anymore.
The use of life insurance in wealth management has plenty to do with defeating the estate tax and settling any expenses that may arise upon or after your passing, such as funeral costs, large debts, or mortgage.
Holding a life insurance policy outside your superannuation will enable the payout of a lump sum to your nominated beneficiaries when you die. On the other hand, placing the insurance on an irrevocable life insurance trust will pass the proceeds of the policy to your family members, sans income and/or estate tax.
Keep in mind that not all of your assets are covered and distributed through your will. Accounts like life insurance, retirement plans, annuities, and taxable investments should always maintain a beneficiary and contingent beneficiary because they may be passed outside of a will.
Failure to name a beneficiary before your death means the court will get to decide the fate of your funds. And as the judges are grossly unaware of your situation or intent, your money may be distributed against your wishes.
Set Up Trusts
Avoiding probate is a common goal in estate planning. Apart from being potentially expensive, going through probate can make your financial affairs public.
Transferring your solely-owned possessions to a revocable living trust and naming yourself as the trustee allows you to retain control of the assets while you’re still alive. Upon your death, the properties inside the trust directly go to your chosen beneficiaries without undergoing probate or incurring fees. Also, trusts are an effective way of managing your taxes, especially when capital gains and income taxes are concerned.
Setting up trusts, however, requires meticulous attention to detail. Even a minor oversight may kick the estate into probate. Best seek the help of an experienced trust attorney to draw up the documents.
Prepare Critical End-of-life Documents
Estate planning is not only for when you die. It’s also meant to take care of you during your lifetime. Thus, to ensure that your family members fulfill your wishes in the event of your incapacity, it’s important to have the following documents ready.
A release-of-information form will allow your doctors to share your medical records with designated family members or representatives.
A health-care power of attorney gives your appointed person the power to make important medical decisions on your behalf when you’re unable to communicate.
A durable power of attorney lets you designate an agent, whether a family member or third party, to manage all your legal and financial affairs in case you’re unable to do so yourself.
An able and experienced attorney or adviser can help you draft these documents, so your wishes are carried out efficiently and to your desires.
About the Author
Lauren Summers is the Content Marketing Strategist for Miller, Miller & Canby, one of the most respected law firms in Montgomery County, and the Washington, DC metropolitan area. The firm focuses on five core areas of practice: Land Development, Real Estate, Litigation, Business and Tax, and Trusts and Estates Law. In her spare time, she reads books and plays board games with her husband and two kids.