Everyone’s wealth and family situation is different. How can you determine if you are creating the best possible estate plan for you, ensuring your money, assets, and family are cared for? Here is some advice to help.
Determine the main things you would like to accomplish. For example, making sure your wealth is directed to the people and charities you intend; assuring the education of children; providing care for a special needs child; providing that your wealth will not be distributed immediately to your heirs, but will be held in trust and distributed according to a plan you determine; minimizing estate taxes; providing for you, your spouse and your heirs during a disability or incapacity; naming a guardian for your minor children in the event of your and your spouse’s death or incapacity; arranging for medical decisions to be made for you in case you cannot make them, including prolonging your life if it is futile; protecting your assets from existing or potential creditors; or making charitable contributions. This is far from a complete list of all possible estate planning goals, but is an illustration of some popular ones.
Note that although most people think of estate planning as simply drafting a Will, many of these items relate to things that can happen before your death.
Your estate planner will want to know about your assets in detail. Having this information in advance will save time and money in the planning process. Include not just the obvious assets such as your home; other real estate; tangible property such as cars, art, jewelry, bank and brokerage accounts, but also consider your interests in IRAs, 401(k) and pension plans, life insurance, debts owed to you by others and potential inheritances from others.
Many people worry that at death the government will take a large piece of the assets they worked hard to accumulate. For the vast majority of Americans, this is not an issue. Current law allows every individual to pass on to others $5,250,000 free of tax. This includes gifts made during your lifetime (other than annual gifts of $14,000 to as many people as you like, which do not count against your lifetime limit) and passing at your death. In addition, for married couples (which after the Supreme Court’s Windsor decision now officially includes same-sex marriages), if the first spouse to die does not use his/her entire allowance, the surviving spouse may use the rest, in addition to his/her individual limit. After you have listed your assets, consider whether tax planning is really that important in your case.
Most people are focused on planning for death, but there may be some in your life who would benefit significantly from gifts distributed while you are still alive. Gifts can be made either outright or into trusts that control the distribution to the recipients. This is a touchy subject since we don’t know how long we will live or what difficulties we may encounter before death and giving away assets now may not be practical or advisable. Discuss this with your estate planner to see if gifting should be part of your estate plan.
It helps to organize your thoughts as to your primary goals and extent of wealth, but don’t be overly concerned. Estate planners are professionals at this and know how to get to the information. It’s good to think things out and have certain information in hand before meeting with your estate planner, but don’t stress over it. Your planner likely will have questions and issues you haven’t even considered, so do some homework first and then consult your professional.
There are lots of websites and forms available that say they will help you through the estate planning process and that you can do all, or most of it, yourself. Be very careful and recognize that you don’t know this area well enough to protect yourself and avoid crucial mistakes. Whatever you do for a living, you are an expert at it. Know when you are not an expert and consult someone who is.
Things change. Laws change and your personal situation changes. You might adopt or have children or grandchildren, get a divorce, win the lottery (it could happen!) or have a financial reversal. A loved one might have an accident or contract a disabling disease. Once you have an estate plan, make sure to keep it current and in tune with your life. Consider reviewing your plan every five years or sooner if a major event happens.
You want to select an estate planner that is the right fit for your current situation. Consulting with friends and family for referrals is a good place to start, and then also go online and search for reviews from other people who have used an estate planner before. The most important thing is to be sure they have the knowledge and expertise to be able to help you in your particular situation. But in general, do your research before hiring an estate planner that might not be the right fit.
There are many shapes and sizes of estate plans, from basic to very complex. Finding the one that is right for you takes some thought and planning, but is not that difficult to do. Approach the problem as I suggest in this article and do it. You should not put it off because if you don’t have a plan in place the law will take over and things may not turn out the way you would have wanted.
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