1. Evaluate Your Priorities
2. Create or Update Your Will
A will is not the sole piece of your estate plan, but it is one of the most important. If you don’t have a valid will, the laws of intestacy apply. This means your assets will go through probate and be distributed according to state legislation. This process eliminates your ability to control the distribution of your assets. Further, the process is more costly and time-consuming, which will require your loved ones to spend more time and money settling your estate.
Over time, your priorities and wishes are likely to evolve, and your will should evolve with them. Any major life changes, such as marriage, divorce, the birth of a child, the birth of a grandchild, etc. should result in an update to your will. It’s also wise to periodically review and update your will to reflect any changes to your assets.
3. Include a Living Will
4. Designate the Right People
Estate planning involves designating individuals for many different roles: power of attorney, executor, trustees, etc. These roles come with a lot of responsibility, so consider your designations carefully.
One of the most important roles is your power of attorney. This person has the power to handle personal matters, covering everything from opening your mail to filing your tax returns. The executor of your will also plays a large role in handling your estate. This person is responsible for “executing” the transfer of assets as specified in your will. If you choose to set up any trusts, you’ll also need to designate trustees for them. Finally, if you have minors, you’ll need to designate someone to care for them.
Ensure everyone you designate is someone you can rely on and consider appointing two people for every position. Ideally, at least one of these individuals will be younger than you and live nearby.
5. Transfer Assets
6. Assess Your Taxes
Proper estate planning can help minimize some of the tax burden. The more you can take advantage of tax strategies in your estate plan, the more you’ll be able to leave to your loved ones. Preparing now allows you to take full advantage of any and all appropriate tax-saving strategies.
The recent “Tax Cuts and Jobs Act” may have an effect on your estate plan. At the federal level, up to $11.18 million of an individual’s estate is exempt from federal taxation, and $23.35 million for couples. You may have to pay estate or inheritance taxes, depending on the state you live in. Review this list of states to see what level of assets are excluded from your estate tax: https://www.nerdwallet.com/blog/taxes/which-states-have-estate-inheritance-taxes/
7. Talk with Loved Ones
Finally, once you’ve created your estate plan, it’s a good idea to have a conversation with your loved ones. This should include everything from logistics, such as where you keep important documents, to the type of funeral you would like. Having these conversations ahead of time can help prepare your loved ones and provide you with peace of mind.
Creating an estate plan is about caring for your loved ones and making sure your assets are distributed correctly. Keeping the above tips in mind can help simplify the process. For further assistance, please contact our office.