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What is estate planning & why does it matter?

Estate planning refers to the process of arranging for the transfer of an individual’s assets and properties upon their death, in accordance with their wishes. The process typically involves creating legal documents such as wills, trusts, powers of attorney, and advance directives that outline how the individual’s assets will be managed, distributed, and protected after they die.

ESTATE PLANNING • BENEFICIARIES • ASSET ALLOCATION

Estate planning is important for several reasons:

  1. Asset Distribution: Estate planning ensures that your assets are distributed according to your wishes after your death. Without an estate plan, your assets may be distributed based on state laws or by the court, which may not align with your preferences.
  2. Minimize Estate Taxes: Estate planning can help minimize estate taxes, which can significantly reduce the value of your estate. By using various strategies such as trusts, charitable donations, and lifetime gifts, you can reduce the tax burden on your estate.
  3. Protect Beneficiaries: Estate planning can help protect your beneficiaries, especially if they are minors or have special needs. By setting up a trust or other legal instrument, you can ensure that your loved ones receive the assets and financial support they need while minimizing their exposure to potential risks.
  4. Avoid Probate: Estate planning can help avoid the probate process, which can be time-consuming and costly. By establishing a trust or other legal instrument, you can transfer assets directly to your beneficiaries without going through probate.
  5. Retain Control: Estate planning provides you with the power to set out your desired medical care and distribute financial instruments in a way that will benefit both yourself and those close to you. It can grant peace of mind, ensuring future generations receive an inheritance according to your wishes while also minimizing any tax burden they may face.
  6. Peace of Mind: Estate planning provides peace of mind by allowing you to plan for the future and ensure that your legacy is protected. Knowing that your assets will be distributed according to your wishes and that your loved ones will be taken care of can provide a sense of comfort and security. 

Why many don’t have estate plans

Estate planning is about more than just what happens to your assets after you’re gone – it can provide peace of mind and financial security for unexpected events, regardless of age or monetary worth. Unfortunately, some people avoid estate planning out of fear of their own death or demise; others believe they’re too young to be concerned with such matters; while still more think that the process will take up too much time and money. However, giving thought now towards protecting yourself in the future could pay huge dividends further down the line.

Building your estate plan

Estate planning can seem daunting, but a good way to tackle it is by breaking things down into smaller pieces. Start with inventorying your assets and listing out beneficiaries (those individuals you would like to give your assets to); you should also consider the tax laws of your state so that family liabilities are minimized when needed. If any part becomes overly complicated, bring in an expert for help – just remember to revisit this plan periodically as life circumstances may change over time.

Review your assets

Take an inventory of your assets both tangible and intangible. Tangible assets include investments in real estate, vehicles such as cars and boats, collections of items like watch pieces or coins and other personal possessions. Intangible Assets encompass financial instruments like stocks, bonds and private market funds; life insurance policies; retirement accounts including IRAs; annuities and business ownership interests.

After documenting the assets and their ownership, it’s time to determine each item’s worth. In some instances a specialized appraisal is necessary – like with real estate or similar investments; financial records from banks, brokerages etc are also useful in establishing fair value for intangibles.

Family needs & security

Ensure your family’s emotional and financial security with adequate life insurance. Not only will this bring peace of mind that they’re taken care of, but it can also save them from the burden—and sometimes high cost—of covering memorial expenses while in grief.

Protecting your children’s future starts with providing for them in the case of unforeseen events. By naming a primary and secondary guardian, you are ensuring that people who share your values will care for those closest to you should life take an unexpected turn. Designating guardianship is a proactive step towards safeguarding not only their present but also their future well-being.

Review beneficiaries

Naming a beneficiary for retirement and insurance accounts should never go overlooked. Doing so can ensure that your finances are allocated to the right people, even if it differs from what is originally listed in wills or other documents. But as life goes on, designations may need changing – particularly after getting remarried while having an old spouse still named as primary beneficiary of assets. Further, make sure to name a secondary beneficiary if primary beneficiaries aren’t able to accept the bequest. 

Write a will

When estate planning, it is critical to take the time and effort to properly execute your wishes in a formal document. Your choices may be as straightforward or complex as needed, but utilizing an online template or engaging with legal counsel can help ensure that costly errors are avoided. Additionally, you should make sure that every detail of what is being conveyed within this document remains crystal clear so there will not be any discrepancies between heirs over interpreting these instructions down the line. Splitting up tangible assets can be tricky, so it might make more sense to assign ownership or convert them into cash and divide the proceeds.

When writing your will, it’s important to choose an executor who is reliable and detail-oriented. Although a legal or accounting background may be helpful for this role, any responsible individual can take on these duties as needed. Additionally, you’ll want to specify directives regarding trusts and medical care decisions in the document; which could include granting powers of attorney so someone else has permission to manage finances or make healthcare choices if necessary.

Review tax implications

Consult with a tax professional or estate planning attorney to understand the tax implications of your estate plan. Explore strategies to minimize estate taxes, such as gifting assets during your lifetime, establishing trusts, or leveraging exemptions and deductions.

Properly store documents

Proper estate planning ensures that your loved ones are taken care of when you’re no longer here. Besides creating and signing a will, it’s also important to gather related documents such as trust agreements, living wills or powers of attorney in a safe place. This may include insurance policies, deeds, bonds and other financial instruments for easily accessed distribution upon passing away. By taking these extra steps now you can help ensure smooth sailing at what could otherwise be an emotionally difficult time down the road.

Regularly review and update your plan

Life circumstances and laws can change over time, so it’s important to periodically review and update your estate plan. Major life events like marriage, divorce, birth or adoption of children, or significant changes in your financial situation should trigger a review of your plan to ensure it remains aligned with your current wishes.

Estate planning is a thoughtful way to express your love for those who matter most. It not only allows you to make sure that your wishes are honored, but it also provides an extra layer of comfort and stability during trying times when they’re needed the most.

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