No matter how old you are, it’s never to early to start some estate planning. Some simple measures can make a world of difference for you and your family, even if that eventuality is way in the future.
You also do not have to be a multimillionaire to take advantage of the laws surrounding trusts and estates. Some careful planning with the assistance of a qualified attorney can help you make preparations now while you are creating your legacy.
Here is a broad overview of Estate Planning 101 to help you get started. These questions will help guide you as you begin to plan for the future.
1. Where Do You Live?
When you begin to plan your estate, you first need to consider where you live.
If you live in Wisconsin, you will not have a state estate or inheritance tax. However, if you own property in a state that does have this kind of tax, like New Jersey or Pennsylvania, that state may levy taxes on your beneficiary or your estate.
If you are very wealthy now or in the future, your estate may be subject to federal taxes.
However, there are other financial benefits to estate planning, even if you do not expect a large tax bill. If you place certain accounts in trust for your children, they may derive tax advantages while the money grows over time.
2. What Do You Have?
Owning property, a business, life insurance, or other items of value means you should plan for their distribution after your death.
The more money you have, the more you need an estate plan. However, even people who consider themselves middle class can benefit from having a will and even trusts to determine who gets what.
If you have a large family, you may want to specify who gets how much of your estate. You may wish to include only those who will need it. You may wish your money to go to your children, but to be managed by another family member until they are aged 25 or 30.
Passing your assets to beneficiaries through a trust can also be more expedient than going through probate. Probate can be a long and contentious process. If you plan your estate carefully, the people you leave behind will have access to your property and money through a trust more quickly.
3. Who Do You Take Care Of?
If you have small children, you should have a will and estate plan. No one in their twenties or thirties likes to think they may die one day, but unfortunately, terrible things do happen. You want to take care of your family, just in case the worst happens.
In addition to making financial arrangements for your children, you may also want to designate who will take care of them. Some wills will name a guardian for minor children if both parents die.
You may also name someone to administer the estate, (control the money) after you pass away. They might be given the responsibility of deciding on what the money in the estate can be spent for the benefit of the children. For example, they might be able to approve college tuition but not the purchase of a motorcycle.
If you have someone with disabilities in your family who is unable to work for a living, you may want to make special provisions. There are trusts that can be set up for the benefit of disabled people which provide special protection. These special needs trusts may be funded by an inheritance from you.
These trusts aim to ensure that your family member is taken care of throughout their life.
5. Who Do You Trust to Take Care of Your Affairs?
When you plan your estate, you must choose someone to pay your debts, distribute your assets, and make sure that all of your wishes are followed. This will be your Personal Representative.
You can give your Personal Representative a wide range of power, including the ability to file taxes on trusts, distribute monies to beneficiaries, and even arrange your funeral.
Your Personal Representative can be your spouse, a trusted child or friend, or a lawyer or accountant. You should also name alternative Personal Representatives in case they predecease you.
You can also assign someone the responsibility to make end-of-life medical decisions on your behalf.
6. What Does Your Family Structure Look Like?
Did you remarry late in life? You may want to make specific provisions to leave your estate to the children of your first marriage.
Do your children fight over money frequently? Is there a member of your family who is unworthy of inheriting from you?
Are your family members well off, or do you want to teach them the true value of hard work? You may wish to give a portion or all of your estate to a charitable organization.
Estate planning will solidify your wishes to reduce infighting in your family and make sure your assets go to whom you want them to go.
7. How Do You Want to Enjoy Your Retirement?
Estate planning specialists and lawyers can help you get the full value of your money before you die.
Estate planning should start well before you retire.
Estate Planning 101: Not As Hard as You May Think!
Estate planning 101 does not have to be difficult or morose. In fact, it is a great feeling to understand you can make the most of your income and provide for yourself and your family in the future.
By exploring your options and setting up your affairs now, you will reap the rewards for a long time to come.
For more information on planning your estate, contact us.