Planning for the future can be overwhelming; especially when you are trying to ensure your beloved ones are left with all the might need to overcome your final departure.
As the majority of important things in life, estate planning is an ongoing process and should be started sooner rather than later. A good moment to start thinking of your estate plan is as soon as you have any measurable assets.
As life progresses, your priorities, needs and goals will shift, so your estate plan should accommodate to these new objectives.
Bear in mind that the lack of adequate estate planning can cause excessive financial burdens to your beloved ones - estate taxes alone can run higher than 40%.
So, let’s get started for the very beginning and see what is estate planning and what the most common documents are and processes you will need to include in your estate plan.
What is Estate Planning?
According to Investopedia, Estate Planning is the collection of preparation tasks that serve to manage an individual's asset base in the event of their incapacitation or death, including the bequest of assets to heirs and the settlement of estate taxes. Most estate plans are set up with the help of an attorney experienced in estate law.
- Create a will
- Limit estate taxes by setting up trust accounts in the name of beneficiaries
- Establishing a guardian for living dependents
- Naming an executor of the estate to oversee the terms of the will
- Update beneficiaries on your life insurance, IRAs and 401(k)s
- Establishing annual gifting to reduce the taxable estate
- Setting up durable power of attorney (POA) to direct other assets and investments
My Estate Plan: The Documents I Need
Having a thorough estate plan that clearly explains your intentions will help others know your wishes after your death, or if you are incapacitated. In any case, having our complete Estate Planning Checklist handy will prove useful to cover all of your bases.
There are different documents you can fill out to ensure your estate planning wishes materialize:
- Will, the most widely recognized formal way of expressing your final wishes.
Tip - A will is most effective when it's signed by you in the presence of witnesses.
- An advance care directive is the formal name for a living will. You can use one to specify the course of your medical treatment at times when you cannot articulate choices for yourself.
Tip - State laws vary on the strength and enforce-ability of advance care directives.
- A health care proxy lets you designate someone to make choices about your medical care when you are unable to do so.
Tip - Like the advance care directive, the power and range of a health care proxy's authority is dictated by state law, which varies widely.
- Statements of intent allow you to lay out your philosophy and preferences for the guardians and trustees who will be asked to carry out your wishes.
Tip – This offers a perfect opportunity to articulate expectations for your dependents, as well as to state any additional desire.
Choosing The Right People: Managing Beneficiaries
Millions of Americans die each year without any type of estate plan in place, what forces their families to go into unnecessary struggle such as getting into the court system, where they experience the high cost and time delay characteristic of probate proceedings.
In fact, recent data show that more than half of Americans don’t even have a will or any type of estate plan.
To avoid your family and beloved ones the extra suffering, it is important that you decide who you want to benefit from your estate plan once you are not here. These are some of the decisions you need to make in this regard:
- Decide who are going to be the beneficiaries of your wealth
- Identify the people you trust the most to manage your estate planning so you can rest reassured that your dependents will have their needs covered even when you are not here anymore to provide for them
- Think of provisions you may want to implement for minor children or children that act like minors and have special needs for managing their finances
- Avoid your family having to go through probate because you own a personal residence, business, or rental properties
- Minimize estate tax with the most appropriate trust account or trust fund
At Bank of Internet USA we understand how important it is for you to ensure the future of your beloved ones. That is why we want to help you find the online banking solution that better suits your estate planning basics. Whether it is a Trust Account or an IRA, our expert team of online bankers is just a call or click away.
For more on our Estate Planning Debunked series, stay tuned on the Bank of Internet USA Blog