Tips for Estate Planning

February 1, 2014


Estate PlanningAs companies keep shifting the responsibility to save for retirement onto their employees and the government abandons pension plans, estate planning will become a very important step in creating a financially secure future for your family. Over 120 million U.S. citizens do not have up-to-date estate plans according to the National Association of Estate Planners and Councils, leaving themselves and their families unprotected in case of accidents, sickness or death.

Elements of the Estate Plan

Typically, an estate plan includes drawing up a will, assigning power of attorney and compiling a living will or specifying a healthcare proxy. You will have to appoint an executor who will distribute your assets according to your will. This may be a child or spouse or a professional such as a certified public accountant. Assigning power of attorney means that you will have a trusted individual handle your bills and affairs if you are incapacitated. A living will expresses your wishes to your family and healthcare providers about medical procedures if you are unable to make these decisions yourself. A healthcare proxy can also be appointed to make medical decisions on your behalf.

Getting an Overview

Before you can start compiling your will and estate plan, you have to take inventory of your current assets. This includes any retirement savings, investments, insurance policies, business interests and real estate.

Declaring Beneficiaries

Be sure to mention specific non-financial assets for which you consider the disposition to be important, for example that special piece of jewelry your favorite niece always used to admire. However, also keep in mind that for certain assets, the beneficiary designations are subject to governing agreement terms. Examples include life insurance policies and tax-deferred retirement accounts in the U.S. Check with your financial institution to determine which rules apply.

Creating A Trust

You can also specify in your will how you want assets to be spent, such as assigning certain amounts to cover college or pay for the special needs of your beneficiaries. This may require you to create a trust, in which the trustee is legally bound to pay over the designated amounts to cover these expenses.

Get Help from Experts

While estate planning is not overly complicated, and you will find a lot of valuable online estate planning information, you may want to also call in the help of a team of experts if your estate is big enough. An estate planning attorney will be able to help you create the wills and trusts and ensure that your estate plan meets the requirements of both state and federal laws. A tax professional can advise you on how to minimize the taxes your beneficiaries would have to pay on their inheritance and a financial advisor can draw up an investment portfolio that will ensure that your assets are safe and will keep accumulating. If you do employ a team, ensure that they maintain communication about any changes that are made.

Re-Evaluate the Plan

Once you have compiled an estate plan, you should revisit it occasionally and update any beneficiaries after major life events such as divorce, marriage or death of a beneficiary. Also ensure that family members know where your important documents are kept should anything happens to you.

Image credits:  renjith

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