One understands the importance of estate planning, but sometimes it’s a question of where to start. No matter a person’s net worth, they need a plan set in place that can help their heirs, understand their final wishes and distribute their estate properly. As one prepares to discuss with their financial advisor, here are a few tips and considerations to keep in mind.
Name an Executor
After one’s passing, a person will want to have somebody in place who can execute their wishes. This person is aptly named an executor.
Many people choose a spouse, sibling, child or close friend as executor. In most cases, the job is fairly straightforward. Still, they might give special consideration to someone who is well organized and capable of handling financial matters. Someone who is respected by your heirs and a good communicator also may help make the process run smoothly.
Above all, an executor should be someone trustworthy, since this person will have a legal responsibility to manage your money, pay your debts (including taxes) and distribute your assets to your beneficiaries as stated in your will.
If the estate is large or it’s anticipated a significant amount of court time for the executor, one might think of naming a bank, lawyer or financial professional. These individuals will typically charge a fee, which would be paid by the estate. In some families, singling out one child or sibling as executor could be construed as favoritism, so naming an outside party may be a good alternative.
Understand Estate Taxes
Tax planning should be an integral part of an estate planning strategy. Work with a tax professional who can help you navigate state inheritance laws and federal estate taxes. The 2017 Tax Cuts and Jobs Act raised the federal estate tax significantly, making it easier for families to maintain their estate when transferring to loved ones. Estates with combined gross assets under $11,700,000 (for individuals) are not required to file an estate tax return.1
Prepare Your Health Care Documents
Healthcare documents spell out your wishes for health care if you become unable to make medical decisions for yourself. They also authorize a person to make decisions on your behalf if that should prove necessary.
These documents may include:
- Living will
- Power of attorney agreement
- Durable power of attorney agreement for healthcare
Assess the Life Insurance Policy
When was the last time for assessing the life insurance coverage, and compared the life insurance benefit with the financial obligations? Keep in mind that several factors will affect the cost and availability of life insurance including age, health and the type and amount of insurance purchased.
Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. One should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.
Write a Letter of Intent
A letter of intent is a non-legal document that outlines your wishes. A strong, well-written letter may save your heirs time, effort and expense as they administer your estate. It acts as a message from the deceased and can include an array of information from providing organization and outlining last wishes, to detailing information and sending personal messages. Consider including instructions for your funeral arrangements and other details that are important.
Organize Your Documents
After passing, have the heirs and executor to be able to easily obtain and access important documents.
These documents may include:
- The will
- Trust documents
- Life insurance policies
- Deeds to any real estate, and certificates for stocks, bonds, annuities
- Information on your financial accounts and safe deposit boxes
- Information on your retirement plans
- Information on any debts you have: credit cards, mortgages and loans
Talk to the Family
Do es one have stepchildren and ex-spouses? Have they been caring for any foster children or have been caring for a grandchild, niece or nephew? With the help of a financial planner and an attorney, one can structure a will or trust that accounts for everyone they wish to provide for. The more clear and specific you can be the better, as you will reduce the amount of confusion among your family. Otherwise, everyone who thinks they deserve something from the estate may try to extract it in probate.
There are many factors to consider when creating a will or trust. Before diving into the estate planning process, one should consult with a seasoned financial professional and estate planning lawyer. They will help make sure they’ve covered all the bases when working to plan for their passing.
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.
Company Name: Silverman and Associates
Contact Person: Mark Silverman
Country: United States