What You Need to Know About Estate Planning

Everyone should have an estate plan. An estate plan protects your family and your assets if unexpected life events should occur.

If anything should happen to you and you do not have a plan in place, your state law determines who will get your assets.

It does not matter if you have only some assets or a lot, or many close family members or none. Without proper planning, your assets could end up in probate court, which is not only time consuming but expensive.

A study by Caring.com found that more than 50 percent of Americans do not have a will and only 42 percent of adults have estate planning documents in place. Estate planning is even more important for unmarried couples and blended families, as the law awards assets to biological relatives if there is no will and a partner would be excluded. Spending time to prepare for your future can save you from unfortunate outcomes and create the peace of mind needed for you and your family.

Here are some steps you should know for estate planning:

Make a list of the assets you want your estate plan to cover.

One main goal of creating an estate plan is to ensure your assets are easily transferred to the beneficiaries you designate. This requires a list of exactly the assets you want your estate plan to cover, such as real estate, vehicles, investment accounts, jewelry and even patents or business interests. Putting everything on paper helps to clearly organize what you have to give your loved ones.

Identify the loved ones you want to provide for or protect.

You’ll need to think through immediate family, extended family, friends or even charities that you may want to give to when the inevitable happens. This list could include your spouse, children, parents, friends, business partners and even pets.

Decide on charitable contributions.

If you have a favorite charity, you may want to make charitable contributions. You may choose to create a charitable remainder trust, which is a tax-exempt irrevocable trust that allows beneficiaries of your choosing to receive income from the trust for a certain period of time before the remainder of the assets in the trust are handed over to charity. You may also choose to provide a direct gift, or even create and endow your own foundation.

Determine if your beneficiaries have special situations.

If you are naming children under 18 in your estate plan, they cannot inherit money directly, so a named person will need to act as a guardian. If you choose to leave money to providing care for a beloved pet, specific instructions must be included as well, since pets cannot inherit money directly. If you are wanting to name someone who is disabled, you’ll need to consider if adding financial resources will disqualify them from special medical access they depend on. There may be other special situations to take into consideration.

Consider your wishes if you become incapacitated.

While no one wants to think about becoming incapacitated, it’s an important consideration in an estate plan. You’ll need to decide what kind of healthcare to receive, including determining whether you want measures to be taken to prolong your life. You’ll need to determine who should make decisions for you on your care and who will manage your assets. This can be addressed with a living will and healthcare power of attorney.

Evaluate your insurance policies.

If your own death will create hardship for loved ones, you may want to consider life insurance as part of your plan. If your family depends on your income, or if you have a minor child in need and you want them to be taken care of, a life insurance policy provides money or a safety net for your loved ones. You may make a trust the beneficiary of the life insurance policy, which allows the funds to pay out to the trust, and then the trust outlines specific instructions for your assets.

Determine how your plans will be implemented.

Trusts protect assets and transfer wealth outside of probate. In a trust, you name a trustee who controls the trust assets and name beneficiaries to receive the assets. A revocable trust allows you to be the trustee managing the assets and you may rewrite the terms. In an irrevocable trust, you give up control over your assets but have more protection against creditors or tax situations. Once a trust is created, you must then ensure that you move your assets into the trust.

Revisit your plan every five years.

If your plan is complete, this does not mean that it is final forever. Estate plans are not to be created and long forgotten. Changes can happen in life, from deaths to marriages, or maybe the person you’ve chosen to administer your estate is no longer capable. You should revisit your plan from time to time, at least once every five years, to ensure that it is current. Lastly, once your plan has been created, know where you can easily find your documents if needed.

If you do not properly put estate planning documentation in place, you could cause your heirs to pay significant taxes or deny them your inheritance. This makes legal and financial advice critical. If you have questions or if you need an estate plan, schedule an appointment on our online calendar by selecting the date and time that is most convenient for you! You can also always reach us at info@bayntree.com.

Bayntree Wealth Advisors provides comprehensive financial planning and wealth management. The Bayntree team specializes in all aspects of financial health, including retirement planning, risk management, investment advice, tax strategies, estate planning and insurance.

Bayntree does not provide specific legal or tax advice. Please consult with your tax advisor or legal professional for guidance with your individual situation.

Resources:

  • https://blog.massmutual.com/post/estate-planning-5-big-mistakes-you-might-be-making?_ga=2.252266188.450758168.1594865153-1134712011.1594865153
  • https://www.fidelity.com/go/fidelity-estate-planner
  • https://money.usnews.com/money/personal-finance/family-finance/articles/2017-07-14/10-essential-estate-planning-tips-everyone-should-know
  • https://www.fool.com/retirement/estate-planning-checklist-everything-need-to-know.aspx
  • https://www.forbes.com/sites/learnvest/2013/05/24/estate-planning-your-need-to-know/#2d233c024048
  • https://www.thinkadvisor.com/2013/08/09/revocable-vs-irrevocable-which-trust-is-right-for-your-client/
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