Estate Planning

Even if you are not “rich”, you need to do estate planning. Your estate includes everything you own. It can be any size. That’s why it is worth taking time to plan now. You need to plan what happens to your estate as well as your own health and financial needs. 

What is estate planning?

Estate planning is the process of determining who will receive your assets and handle your responsibilities after your death. It also involves deciding who will make heath care decisions and oversee your finances if you are not able to do so on your own.

Making an estate plan now is critical. You can always change it if your personal and financial situations shift over time.

Here are some basic considerations for creating an estate plan:

1. Make a list of what you have

Make a list of all your assets. You might be surprised at what you actually have when you put it all together.

The “tangible” assets, things you can touch, might include:

• Homes, land or other real estate
• Vehicles including cars, motorcycles or boats
• Collectibles such as coins, art, antiques or trading cards
• Other personal possessions

The “intangible” assets, things that have value, might include:

• Checking and savings accounts and certificates of deposit
• Stocks, bonds and mutual funds
• Life insurance policies
• Retirement plans like an IRA, 401(k) or 403(b)
• Health savings accounts (HSAs)
• Ownership in a business

Once you inventory all of your stuff, think about how you want to distribute all of it when you pass on.

2. Establish who will make decisions for you if you are not able to do so.

A complete estate plan includes important legal directives.

• A trust might be better than a will. With a living trust, you can control your estate while you’re alive. If you become ill or incapacitated, your selected trustee can take over. Upon your death, the trust assets transfer to your designated beneficiaries, bypassing probate and keeping your plans out of the public record.
• A medical care directive, also known as a living will, spells out your wishes for medical care if you aren’t able to make those decisions yourself. You can also give someone medical power of attorney for your health care. That person the authority to make decisions if you can’t.
• An Advanced Care Directive is a more detailed outline of specific medical practices that you do or don’t want to take place if you become incapacitated.
• A durable financial power of attorney allows someone else to manage your financial affairs if you’re medically unable to do so. Your designated agent, as directed in the document, can act on your behalf in legal and financial situations when you can’t. This includes paying your bills and taxes, as well as accessing and managing your assets.
• Be careful about who you give power of attorney. They may literally have your financial well-being — and even your life — in their hands. You might want to assign the medical and financial representation to different people, as well as a backup for each in case your primary choice is unavailable when needed.

3. Plan Your Legacy

What do you want to have happen? How do you want your plans to reflect what matters to you? This is the best part of estate planning, imagining what is possible for the future of the people and organizations that you care about.

• Make sure that you have named your beneficiaries carefully. People sometimes forget the beneficiaries they named on policies or accounts established many years ago. Take a look at what you currently show on your various intangible assets.
• Don’t leave any beneficiary sections blank. In that case, when an account goes through probate, it may be distributed based on the state’s rules for who gets the property.
• Name contingent beneficiaries. These backup beneficiaries are critical if your primary beneficiary dies before you do and you forget to update the primary beneficiary designation.
• Think of the charities that have mattered to you. You can name them as beneficiaries as well. If you have an IRA, commercial annuity or similar assets, naming a charity as the beneficiary, even for a small percentage, can save your heirs real tax dollars.
• You can also create your legacy now by knowing more about planned gifts (LINK to P/G page)

4. Weigh the value of professional help

Whether you should hire an attorney or estate tax professional to help create your estate plan generally depends on your situation. Talk it over wit your family and advisors. The investment now, may be a very small expense for you later on.

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