Estate planning refers to the process of assigning and distributing your assets when you pass away. When you plan for your estate, this will dictate the way your loved ones will conduct your affairs if you’re incapacitated and can’t make these decisions on your own.
If you want to make sure you don’t burden your spouse, children, or next of kin with paying high taxes on your estate, it may be best to get an irrevocable trust.
You can also explore the options of a financial power of attorney and/or a living will. Here is some useful information that will help you make the best decisions for your future.
What Are Wills?
Even though you may not realize it, you likely have an estate. Your estate is the sum of your possession during your lifetime or when you pass away.
This means your estate includes your car, home, stocks, bank accounts, life insurance policies, and jewelry, as well as any personal or professional interests you own.
The simplest form of estate planning is known as your last will and testament. This is a document that details your final wishes pertaining to who you want to take over your assets or how you’d like the assets to be distributed.
If you don’t have a will when you die, the state will interfere with the affairs of your estate. It’s best to leave a will for your loved ones so your relatives can handle your valuables and properly based on your wishes.
Types of Trusts
There are a few trusts you should be aware of when it comes to estate planning. Trusts ensure that the courts won’t get involved with your estate if you pass away or are incapacitated. A revocable living trust is often used for estate planning.
All the assets you add to the trust are assigned to the beneficiaries of your choice. You can be the trustee and grantor of this trust and maintain control of your assets even though the trust technically owns these assets now.
An irrevocable trust is best if you want to retain the assets of your estate. Once you set up an irrevocable trust, it can not be changed. Since you are the grantor, you no longer have control over the assets in the trust, and the trustee takes over.
Your assets won’t be part of the valuation of your estate with an irrevocable trust, which may save your heirs money on estate taxes.
Thorough estate planning means that you make provisions for how you’ll be cared for if you face major health issues. This means you need a health care declaration, which is also referred to as a living will.
This gives a trusted loved one the power to make decisions for your healthcare. You may have already expressed your medical or health wishes to your children or spouse, but you should have these wishes in writing so the state won’t intervene.
This keeps your family from having to deal with the stress and extra expenses that can come with the court’s involvement.
You may also want to give a relative power of attorney over your monetary affairs. The power of attorney may already be given to your financial advisor or trustee, but you need to specify this in writing.
When you inform your loved one or advisor about your final wishes, be sure you are as clean as possible. This will likely be a challenging and emotional discussion, but you should make sure all your wishes are clear.
It’s clear to see that estate planning is an ongoing process. You should go over your plan with your relatives and your attorney every few years. If you experience major life changes, be sure to make adjustments to your will as soon as possible.
Stay up to date on estate laws in your state so you’ll know what your beneficiaries are entitled to. For additional information, you can reach an estate planning attorney here.