Have you ever heard the term “estate plan” and decided to shrug it off as “something you’ll get to later?” Estate planning is important and involves distributing your assets after death to specific people or causes according to your wish with minimum legal complications and the least tax incidence. A common misconception is that estate planning is just for the wealthy; nor is it something to be contemplated when you reach the ripe old age of eighty these are both false statements. If you have assets in your name, estate planning is essential to ensure that your loved ones are taken care of and your wishes are granted.
Anybody (irrespective of age) with considerable assets and the desire to provide for loved ones after death would be doing a great service by planning one’s estate. If there isn’t an estate plan in place, then your assets go to the state government. They then decide who gets what, and in some cases, will auction off your properties and other things that belonged to you.
Think of it this way, if you’re in the hospital and unable to communicate your wishes, how will your assets be divided? The best time to plan your estate is now when you are still alive and have the requisite mental health to make rational decisions. An estate plan made during an illness affecting contracting capacity can be challenged, complicating matters for beneficiaries. Remember, death or a debilitating illness affecting your legal capacity to contract might strike you any day; therefore, you should prepare for that eventuality beforehand.
The first step in planning your estate is to take stock of all your material possessions (technically referred to as ‘estate’), and then determine their value. Typical items comprising the estate include: house(s) and land; bikes, cars, planes and boats; cash-in-hand; savings accounts, pension accounts; stocks, bonds, and mutual funds; insurance and annuities; employee benefits; jewelry, art collections; ownership rights/interests in businesses; and claims against others. Mind you, the list is not exhaustive and your debts and obligations to others are also a part of your estate.
Next, line up the details of your beneficiaries – names, addresses, and ages. Also, you should determine who should be the trustees/guardians in case the beneficiaries are minors at the time of planning the estate. Also, you must identify an executor of the estate. It would be easy if you line up pre and postnuptial agreements, divorce decrees, previous wills, deeds of real estate property, and latest tax returns before you consult a professional estate planner.
Though small estates might be easy to plan, it is advisable to take the help of professional estate planners, including attorneys and CPAs, to explore all the possibilities to reduce tax incidence. Remember, estate planning is not a one-time affair. Any change in your marital status, death of beneficiaries, the birth of a child, or changes in the law will require a review of the plan.
Estate planning is an important part of having assets to your name. By setting it up now, it makes future situations easier to navigate. Get a reputable professional to help you in setting up your estate plan, and also keep it up to date. After all, an estate plan that’s out of date doesn’t have the success as one that is constantly reviewed.