As many of us get older, we begin to wonder how we can ensure our assets, legacy, and family are protected after our passing. You don’t need to be rich to begin estate planning, as your estate can be any size. Planning your estate is a worthwhile task that can ensure your assets are allocated wherever you desire.
What is Estate Planning?
Estate planning is the process of organizing who receives certain assets and who handles certain responsibilities after your passing or incapacitation. One key goal of estate planning is to minimize overall taxes, such as estate tax and gift tax to ensure your loved ones receive the most value they can from your estate.
7 Key Steps to Planning Your Estate
1) Inventory Your Possessions
One of the first steps to planning your estate is to inventory all of your possessions and other tangible or intangible assets. Some examples of tangible assets include, real estate, vehicles, collectibles, and other personal items. Intangible assets such as savings accounts, stocks, business ownership, and more can also be included in your inventory.
Once you list all of your assets, it is vital to estimate their value. You can value your assets through appraisals (such as for your home) or even through financial statements provided to you by your bank or financial institution.
2) Understand Your Loved One’s Needs
One vital step in planning your estate is ensuring that your loved ones are protected after you pass. Right now would be a good time to see if you have enough life insurance, have a guardian for your children, and to note any wishes you may have for your children’s care. If you do not outline your family’s needs in your estate plan, the court may not abide by your wishes.
3) Legal Directives
A comprehensive estate plan will incorporate multiple legal directives. One example of a legal directive would be a trust. With a living trust, you will have the ability to move portions of your estate toward certain things while you are alive. If you were to become ill, your trustee can take over. After your death, your chosen trustee will transfer your assets to your chosen beneficiaries.
Another example is a medical care directive, which outlines your desires for medical care if for some reason you become unable to make those decisions yourself. If you become unable to medically care for yourself, you may appoint a durable financial power of attorney, which allows somebody else to manage your financial affairs when you can’t. This can include paying your taxes, bills, and managing certain assets.
4) Take Time to Review Your Beneficiaries
It is important to review all of your beneficiaries often. In many cases, banks and other financial institutions may already have beneficiary designations, which in some cases may outweigh your will. You will want to ensure that your beneficiaries are updated to your wishes. You also want to ensure that no beneficiary fields are left blank, or else the court may distribute those assets based on state laws.
Additionally, if your primary beneficiary passes before you, you will want to have a backup beneficiary in case you forget to update your beneficiary designation.
5) Understand Your States Estate Tax Laws
One key aspect of estate planning is attempting to minimize any taxes that may be imposed on the estate. However, the vast majority of estates will not undergo most taxes. Although some states may have a state tax for your estate, at the federal level, only estates larger than $11.58 million will be taxed as of 2020. It is also important to note that some states may have an inheritance tax, which means that those who inherit certain sums of money may be required to pay tax on it.
6) Consider Professional Help
Getting professional help from an attorney or estate tax professional can be helpful. A skilled attorney, such as the ones at Dishowitz Law, can help you plan your estate in the most efficient manner by ensuring your loved ones pay the least amount in taxes possible and by saving you time when it comes to planning your estate. A qualified estate planning attorney can also help you navigate and plan more complex estates.
7) Reassess Often
Circumstances change frequently. When circumstances change or certain events take place, you will want to ensure that your estate plan is up to date. Whether for better or worse, you should ensure your estate reflects your current wishes. Revisiting your estate even without any significant life changes can also ensure your estate distribution goes smoothly with ever changing laws.
Final Note
Planning an estate is a necessary step to ensure your assets are allocated as you please. If you have questions regarding your estate, or are looking for further guidance on creating your estate plan, the team at Dishowitz Law can help. Our experienced estate planning attorneys have helped hundreds of individuals plan their estates in an efficient and cost-effective manor. To learn more, or to receive a free consultation, reach out to Dishowitz Law today.