Preparing your estate plan in your lifetime should be a priority. Although it’s not something many people want to think about, it is an essential task to complete before you die. Preparing an estate plan means you are able to choose who inherits your assets and all the things that you’ve worked your whole life for. Protect your loved ones by making a detailed plan with all the information they will need, and keep family drama at bay by making it clear which person will get what. Keep loved ones out of unnecessary debt, and reduce costs for those you’re leaving behind as much as possible.
Estate planning in more detail
So what is estate planning? Estate planning is a process in which a person arranges the passing on of their assets in the event of their death. Estate planning can involve a number of things, such as naming beneficiaries across banking accounts and investment accounts, passing on personal belongings, and detailing funeral arrangements.
The idea behind estate planning is to keep behind the most wealth possible for your beneficiaries, as well as to protect your loved ones from the complicated and stressful process of distribution and settlements after your death. With a plan in place, estate executors are provided with a clear plan on how to divide your estate and reduce the chances of conflict and unexpected legal fees for family members left to work through this process.
What do I need to think about when planning my estate?
Before diving into your estate planning, you should look at your objectives and identify your priorities. Ask yourself these questions to help come up with a plan:
- Do you have any interest in donating to charity
- Do you want beneficiaries to have access to your wealth in your lifetime or only after your death?
- Who are the people you wish to benefit from your wealth?
- Do you have a previous marriage or a person in your care with special needs whom you will need to plan specifically for?
Once you’ve come up with answers to these questions, you can begin to work out which steps and components to include in your estate plan.
Protect your beneficiaries
As much as estate planning used to be something that was only seen as worthwhile for those with substantial net wealth, things are quickly changing. Estate plans are now more than necessary if you own any assets at all. It is important to give yourself the opportunity to dictate who inherits your property or other assets you may own after you pass away.
The main aspect of estate planning is determining who will inherit your assets, and this will protect your beneficiaries from a lengthy and emotional court process to decide on the distribution of your belongings. Save your family members the trouble of finding a lost policy or life insurance claim, and detail everything in your estate plan.
Protect young children
Although the thought of dying young is one most of us would rather avoid, as a parent it is your responsibility to prepare for even the worst case circumstances. The part of your estate plan which includes the will is important here, as you can use it to detail the intended guardians for your children in case both parents pass away before the child reaches 18. This ensures you get the final say in your child’s care and prevents the courts from having to step in to make a final decision on who will gain custody of your children.
Plan ahead to reduce taxes for your heirs
In the interest of protecting your loved ones, tailor your estate plan to protect them from the Internal Revenue Service (IRS). This will help you to pass on assets to your beneficiaries with the lowest tax burden you are able to. There are a number of ways in an estate plan to reduce your state inheritance taxes, income tax for beneficiaries, as well as federal and state estate taxes. Keep costs as low as possible for your heirs once you are gone with just a small amount of planning.
Take away the worry of family drama
Organizing a stable estate plan is essential if you want to avoid any unnecessary drama within your family at the time of your passing. What is already an emotional time for your family and loved ones is made even more stressful with the task of splitting up a person’s assets. Whether it’s an ex-partner thinking they are entitled to the property, a sibling who has helped a family member through the last years of their life or a child who thinks they deserve a large sum of money, fights around the distribution of assets can get messy and result in lengthy court processes and hefty legal fees.
Making an estate plan allows you to take control of your assets, as well as choose someone to take control of your finances for you in the event you die or become mentally incapacitated. This should help to prevent any family drama and keep everyone happy and informed right from the start of an otherwise very difficult process.
Consider whether you want to divide your estate equally or whether you want to give certain elements or amounts to different family members and loved ones. An estate plan is especially important if you have had a previous marriage or children with multiple partners.
