Estate planning is more than just a legal requirement; it’s a way to ensure the welfare of your loved ones long after you’re gone. With an estate plan in place, you can specify who will receive your assets and how they will receive them, giving you a sense of peace that your wishes will be carried out as you intended. At the same time, creating a well-structured estate plan can also help minimize any unnecessary taxes, ensuring that your beneficiaries receive as much as possible. Working with an experienced attorney will help you navigate the complex challenges of estate planning, allowing you to make informed decisions that will benefit your loved ones long into the future.
Puai Wichman shares key steps in creating a basic estate plan.
1. Create an inventory.
To understand your estate comprehensively, start by creating an inventory. This simple exercise will help you gauge the true extent of your possessions, whether real estate, vehicles, collectibles, or personal items. On the tangible side, consider your homes, land, vehicles, and valuable collectibles like coins, art, antiques, or trading cards.
On the intangible side, don’t forget to account for your financial assets. Consider your checking and savings accounts, certificates of deposit, stocks, bonds, and mutual funds. Also, remember insurance policies, retirement plans, and ownership in a business. These are critical components that contribute to your overall estate’s value.
In addition, Puai Wichman says that it’s important to note any liabilities you still owe. It includes mortgages, lines of credit, or other outstanding debts. Being aware of your outstanding liabilities will simplify the process for your estate executor to inform creditors in the unfortunate event of your passing. Creating a comprehensive inventory of your assets and liabilities ensures a smooth estate planning process and leaves a clear roadmap for your loved ones to follow.
2. Account for your family’s needs.
Create a legally binding will tailored to your unique circumstances. Determine the right amount of life insurance coverage you need to guarantee financial stability for your family. From calculating dual incomes to evaluating the needs of dependent children, we’ve got you covered. Avoid costly and emotionally draining court battles by designating a guardian for your children in your will. Don’t forget to name a backup guardian for added peace of mind.
3. Establish your legal directives.
Ensure your wishes are followed, and your assets are protected by establishing important legal directives. Consider a revocable living trust, a powerful tool that allows you to place your assets in a trust and choose a trustee to manage them. This arrangement ensures that your assets are taken care of and passed on to your beneficiaries without the hassle of probate.
Don’t forget about your medical care. Puai Wichman recommends creating a living will to outline your preferences for medical treatment and appoint a trusted individual to make healthcare decisions on your behalf when the time comes that you cannot. Combine this with a medical power of attorney for added peace of mind.
In financial incapacity, a durable financial power of attorney gives someone else the authority to handle your finances. They can pay your bills, manage your assets, and ensure your financial affairs are taken care of. If you don’t want to give complete control to someone else, a limited power of attorney is perfect for specific tasks like property sales or stock transactions.
Choose your representatives wisely. They will significantly impact your well-being and, quite literally, your life. Consider assigning different individuals for medical and financial representation and backup options if your first choice is unavailable.
4. Review your beneficiaries.
Ensure that your final wishes are fulfilled by reviewing your beneficiaries. While your will and other documents may outline your desires, they may not cover everything. Don’t overlook retirement and insurance accounts. These accounts often have beneficiary designations that take precedence over your will. Stay on top of these designations and update them to ensure the right people receive your assets. Avoid unintended consequences. Many people forget the beneficiaries they named on old policies or accounts. Imagine if your ex-spouse is still listed as a beneficiary on your life insurance policy. Your current spouse could be left with nothing. Don’t let that happen.
Leave no section blank. According to Puai Wichman, failure to name a beneficiary on an account can result in the state determining who receives your property through probate. Take control and ensure your hard-earned assets go where you want them to.
Plan for the unexpected. Name contingent beneficiaries as a safeguard. These backup beneficiaries are crucial if your primary choice passes away before you do and you forget to update your beneficiary designation. The person you entrust with this power holds your financial well-being and your life in their hands. Consider assigning medical and financial representation to different individuals, with backups for each, in case your primary choice is unavailable in a time of need.
5. Weigh the value of professional help.
Utilizing an online or packaged will-writing program may suffice if your estate is modest and your desires straightforward. These programs consider both IRS and state-specific regulations and guide you through the process in an interview-style format covering your life, finances, and beneficiaries. Best of all, you can make updates to your will as necessary. However, if you have any doubts or concerns, it might be wise to consult an estate planning attorney and perhaps even a tax advisor. Their expertise can ensure that you are following the correct estate planning path, especially if you reside in a state with its own estate or inheritance taxes.
For those with larger and more complex estates, such as individuals with unique childcare considerations, business matters, or non-family heirs, the assistance of an estate attorney and/or tax professional is invaluable in navigating the often intricate implications.
But be cautious when selecting a power of attorney. The individual you choose may hold your financial well-being, and even your life, in their hands. Puai Wichman emphasizes that it may be prudent to assign the responsibility of medical and financial representation to separate individuals, ensuring that you have a backup option in case your first choice is unavailable when needed.
Puai Wichman is the founder and CEO of Ora Partners, an international trust provider and wealth management firm.