What is Estate Planning?
Estate planning is making essential arrangements of how your possessions, or “estate,” will be handled if you become incapacitated or die. Without an estate plan, you won’t decide who will receive your possessions. An estate plan typically gives you control over how your assets are divided among your kin. It also organizes your affairs and leaves a written record of your wishes and intentions. If you don’t plan all these when you are still able and alive, state law and probate courts will do it on your behalf after your passing. Chances are that the results are less likely to reflect your wishes or favor your family’s needs. Fortunately, you can avoid all these by making your estate plan with the help of an attorney or financial advisor now.
1. Establish Your Estate Planning Goals
The first thing you need to do before you start your estate planning is to take your time and come up with the goals you want to achieve with your estate planning. Is it to ensure financial support for your family? Do you want to choose the beneficiaries of your estate? Is it to name guardians for any of your dependents? Or do you want to dictate the future management of your business? Remember that estate planning is more than just creating the Last Will and Testament. And understanding fully what you want your estate plan to achieve can help you create goals that align with your wishes.
2. Create an Inventory of Your Assets
Once you have established the goals you want to achieve, the next step is to know what you are working with. You can achieve this by documenting all your assets and debt to know how much of your estate you can leave to your kin. You can start by creating a list of all your debts. Debt is money you owe other people or parties. If you have any outstanding debt, your assets will be used to clear them before they can be passed on to your kin. That’s why it is important to keep your debt in mind when determining how much you can leave to your loved ones. Your debt can be credit card balances, vehicle loans, mortgages, student loans, etc. You can then create a list of your assets. Assets are things you own that have financial value. You can leave your assets to your family, friends, and charities in your estate plan after your passing. Your assets can be tangible such as land, houses, vehicles, and personable. There are also intangible assets, including bonds, stocks, retirement plans, life insurance, etc.
3. Make a Will
The next crucial step is to create your Last Will. The Last Will allows you to communicate and control how to distribute your estate. The Last Will is typically the document with the most authority in your estate plan. The probate court uses your Last Will as a guide when distributing your estate. In your Last Will, you can appoint a guardian if you have minor children.
4. Create a Power of Attorney
A power of attorney is a document that gives one or many people the authority to make property and financial decisions on your behalf while acting in your best interest. The person you pick to handle your finances is known as an attorney-in-fact, and he/she can handle things such as your banking, sign checks from your account, buy or sell real estate for you, etc.
5. Store Your Plans and Inform Your Advisors
The final step of estate planning is to provide copies of your documents, including the Last Will, trusts, insurance policies, etc., to your attorney-in-fact and representatives. When storing these essential documents, make sure you store them in a safe place such as a safe deposit box, bank, or a trustee company. Ensure you provide your representatives with the combinations or codes to access these documents.
