Did you know 50% of Americans over the age of 55 don’t have a will?
Despite the fact that so many people don’t have a will or estate plan, these are necessary documents. With the help of a trust, your family will feel protected in the event of your passing.
If you understand the importance of having an estate plan and want to know how to get started, you came to the right place.
Read on for this easy estate planning guide.
1. Inventory of All Your Things
The first step when creating an estate plan is to make an inventory of what you own. You will never know you have so many valuable things until you sit down and make a list of your assets.
When you make a list, it’s important to divide your assets between tangible and intangible.
Your tangible assets will include the following:
- Houses, condos, land, and other real estate properties
- Cars, boats, and motorcycles
- Collectibles, such as antique objects, coins, and trading cards
- Jewelry and other material possessions
Your intangible assets will include:
- Checkin and savings accounts
- Bonds, stocks, and mutual funds
- Life insurance policies
- Retirement accounts such as employee 401(k) and other IRAs
- Health savings accounts
- Business deeds
After you make an inventory of your tangible and intangible assets, it’s time you determine their value. While it’s easier to determine the value of your intangible assets, you will need to get your tangible assets valued.
2. Needs of Your Family
The purpose of an estate plan is to leave everything in order, and your family protected in the event of your passing. To determine if your family will have everything they need, assess multiple things.
Life Insurance: Do you have life insurance? If so, do you have enough life insurance to leave your family covered?
If your household depends on two incomes, it’s essential you have enough to cover expenses. The last thing you want is for your family not to be able to maintain their current lifestyle.
Also, if you have children, you need to think about college tuition or medical bills.
Name a Guardian: Although no one can raise your children as well as you, it’s still important you name a guardian. Designating a guardian will give your child the best chance of a steady home in the event of your untimely passing.
Before you choose a guardian, you should consider values. It’s essential the guardian of your child shares similar values, educational, and parenting styles.
You should also consider age, health, and financial factors when choosing the guardian of your children. Because becoming a guardian is a big responsibility, don’t forget to ask the guardian before you appoint them.
Wishes for Your Children: Even if you pick a guardian who shares your values, you must leave behind specific wishes for your children. For example, do you wish they attend private school?
3. Sort Out Legal Directives
As part of any estate planning, you need to leave behind specific legal directives. Some of the most common directives include medical, power of attorney, trust, and limited power of attorney.
Financial Power of Attorney: In the event of your death or incapacitation, it’s essential you appoint someone you trust to deal with your finances.
Using a financial power of attorney will allow the designated agent to manage your financial affairs. The designated agent will have certain responsibilities, such as paying your bills, taxes, and managing assets.
Medical Directive: As the name suggests, a medical directive will assign an agent to make medical decisions on your behalf.
Trust: The purpose of a living trust is to designate portions of your estate while you’re alive. For example, if you become incapacitated, the designated agent has the authority to sell specific assets to pay for your medical care, for example.
Limited Power of Attorney: With the limited power of attorney, you can designate an agent to only have certain privileges. For example, you can give a person control to sell your house in the event of your incapacitation, but they won’t have access to any other asset.
4. Make a List of Beneficiaries
The next step when planning your estate is to designate your beneficiaries.
Start by reviewing your retirement and life insurance policies. Typically, when you sign up for a retirement or life insurance plan, you will be asked to pick beneficiaries.
Once you start the estate planning process, it’s important you review the beneficiaries of your policies. If you wish to make a change, this is the time to do so.
You should review your list of beneficiaries after important life changes. For example, if you get divorced, or a loved one passes away.
Although you have named beneficiaries in your life insurance and retirement policies, this doesn’t mean these designations will apply in other documents.
You might wish your spouse and children are the sole owners of the home you share, but you can still give your uncle the motorcycle.
It’s also a good idea to name backup beneficiaries in case one of them passes away before you get a chance to make changes.
5. Become Familiar With Estate Tax Laws
Many people create an estate plan as a way to minimize inheritance taxes. Before you begin the estate planning process, you should become familiar with your state’s laws.
While some states have estate taxes, others only have inheritance taxes. Talk to someone who specializes in estate planning services to ensure you’re not blindsided by taxes.
6. Gather All of Your Financial Documents
When you start planning your estate, you should start gathering all of your important financial documents.
In the event or passing, all of your important documents, such as will, trust, deeds, titles, and policies, should be in one place.
7. Consider Professional Help
The best way to include everything you need in your estate plan is by getting professional help. An estate planning attorney will ensure your estate plan includes all necessary provisions.
Follow This Estate Planning Guide
Now that you are familiar with this estate planning guide it’s time you get the process started.
Start by making a list of your assets, decide what the needs of your family are, designated legal directives, and more.
If you enjoyed these tips and would like to learn more, check out the rest of our blog.