In its simplest form, estate planning is the process of determining what happens to your property after you die. Although many people prefer not to think about their impending death, the reality is that we will all die someday, so it’s very important to set things up with a proper estate plan. However, there are quite a few legal issues involved, and estate planning becomes more complicated to deal with as you acquire wealth and more property. The following basic estate planning tips will cover some of the key issues you should consider in planning your estate.
First and foremost, you will likely consider your children and grandchildren, and think about what you would like to leave for them. You will also need to deal with real property like your home and any investment real estate you own, as well as personal property such as your bank accounts and other possessions. Other subjects that come into play include probate, your future health care decisions, and how your body will be dealt with after you die. And to top it all off, throughout the entire process, you will have to address many tax concerns. Unless you are a lawyer, estate planning can be overwhelming and you likely don’t know where to begin. Check out our 10 Step Guide to Estate Planning, along with these basic estate planning tips to help you along the way.
Should I Use A Will Or Living Trust To Deal With My Property?
Wills are the most popular estate planning tool. They are are simple and pretty inexpensive to have drafted. A will is a written instrument which lays out how your property and wealth will be distributed to your heirs. A will is an easy and effective way for dealing with personal property and bank accounts, but if you own real property like a home or investment real estate, you should consider setting up a living trust.
The main benefit of a living trust is that your property will not have to go through the lengthy and costly probate process, which is explained below. Avoiding probate will save your heirs some major headaches, and therefore having a trust to hold your real property is one of the most important steps you can take in the estate planning process.
Why Do I Want To Avoid Probate?
The short answer is that probate is time-consuming and expensive. Probate can tie up your property for years in some circumstances, preventing your heirs from receiving their inheritance. All the attorney fees and state fees involved can take a major toll on the overall value of the estate as well. So its a good idea to avoid probate when possible.
Probate is a legal process in which the courts deal with your property after you die. The court will have to determine the validity of your will and then handle all debts, creditors, taxes and assets. This usually involves a mountain of paperwork and surely will require help from a lawyer. If you’ve been through any court proceeding before, you know that it is a slow moving and drab process. Probate is no exception, so you do not want to drag your family through it, especially during their time of grief. Probate is unnecessary, expensive, and time consuming. So you should definitely consider involving an estate planning lawyer early on to ensure that your estate is properly structured to avoid probate.
Do I Need To Worry About Estate Taxes?
Estate taxes are the taxes due on your property when you die. Reducing these taxes should always be a primary goal in estate planning to ensure that you maximize the value of your descendants’ inheritance. Fortunately, federal estate taxes have been lighter in recent years and they are now only enforced on estates worth over $5 million. What this means is that most people don’t need to worry much about federal estate taxes. However, some states still enforce an estate tax on all levels. Tax matters are very complicated, so it’s best to consult lawyer if you will need to plan for state estate taxes. You want to have your lawyer reduce, or even avoid, these taxes.
How Do I Name A Guardian For My Young Children?
If you are handling your estate plan when you still have young children, you will certainly want to ensure that your children are properly cared for in the event that something happens to you. Your estate plan can be used to name a guardian for your young children. You will want to keep in mind a situation where both you and the other parent might not be available to care for them in the future, and ensure that you appoint a stable guardian that you trust.
What Is A Health Care Directive and Power of Attorney?
A health care directive allows you to appoint someone else to make your healthcare decisions if you are unable to do so. For example, if you are in a coma and you want to appoint your niece to decide how your doctor treats you, you would use a health care directive. A health care directive is just one part of a broader power, which is the power of attorney.
Power of attorney can encompass not only medical issues, but other powers as well, such as making financial decisions, carrying out transactions, handling business affairs, forming agreements and signing documents, and more, on your behalf. A health care directive and general power of attorney are important pieces of an estate plan that will empower others that you trust to make key decisions in the event that, for whatever reason, you are unable to do so.
What If I Have Specific Requests For My Funeral Ceremony?
All the final arrangements of your funeral ceremony can also be included in your estate plan. You can set out specific directions for your burial or cremation. Most states also allow you to appoint someone to make decisions for you after you die.
The estate planning process deals with a very sensitive topic for many people. However, you want to ensure that everything is handled correctly and according to your wishes. So it’s a wise move to consult with an estate planning attorney and set everything up properly early on. And keep in mind some of these basic estate planning tips along the way.
You are dealing with very important subjects, like your property and your medical treatment, which can have a major impact on your own life and the lives of your family members. Find a lawyer who you feel comfortable discussing this situation with, and get a plan in order for how your assets should be allocated.