Planning an estate starts with having a will. Unfortunately, it goes far deeper than that, and most people who have an estate that may need administration after their death don’t realize it. Caring.com mentioned that estate planning has become less prevalent since 2017, with the amount of Americans with a will or estate planning document dropping by 25%. Planning your estate shouldn’t be something you leave for the last possible moment. In this article, we’ll consider some typical estate plan considerations that may affect how well your estate is redistributed after your death.
The Will Is Crucial
According to Investopedia, a will is a legal document that outlines the distribution of your property and care of minor children in the event of your death. It’s essentially a record of your wishes and helps to make the distribution of your assets much quicker and easier. If you die without a will, the distribution of your property, money, and other owned assets is left to local judges or state officials. What’s more, a lack of clear mandate for who should get what can lead to family strife. The will is only the first consideration you should have when it comes to the distribution of your property.
Make Healthcare Directives
Healthcare directives are a crucial part of ensuring that your wishes are followed when it comes to healthcare, even if you’re not able to voice your opinions. Healthcare directives may be either a declaration (also known as a “Living Will”) or the right to power of attorney for health care. In some states, they combine these two elements into a single document, called an advance health care directive.
These directives can be a good way to ensure that the suffering of your loved ones isn’t drawn out. Going through the pain of seeing you unable to respond may be too much for some. However, emotional attachment may make it harder for them to let go. Leaving the power of attorney for health care with a close friend may make it easier for them.
Know About Estate Taxes
While most estates won’t have to deal with taxes, there are some that may be hit hard from inheritance requirements. As of 2017, the federal government will not impose state taxes on an estate that is worth less than $5.49 million. The exemption value rises yearly to deal with the inflation rate. Couples that are married have a loophole where the spouse can transfer up to twice the exempt amount to their husband or wife tax free. The only caveat is that the spouse needs to be a US citizen. The same amount can be transferred to a tax-exempt charity.
Appoint a Financial Power of Attorney
A durable power of attorney for finances is essential for anyone who earns income or who needs to have their financial obligations dealt with while they are incapacitated. Everything ranging from handling property to managing small businesses will fall to this person. If you fail to name a durable power of attorney, your family will be forced to ask a judge to name someone to the position. If you hold a joint tenancy, are married, or have most of your money in a trust, then you will not need to set up a durable power of attorney.
There are times, however, when you may not want to have a durable power of attorney. Many individuals despise the intrusion and the cost of maintaining a durable power of attorney. Occasionally, an individual may want the court to supervise the use of his or her finances. The court is supposed to be an unbiased authority, and their appointed representative would be answerable to the legal system. Alternatively, an individual may opt to avoid assigning a durable power of attorney because it may lead to family fights. The document that assigns the financial power of attorney is a strictly defined legal statement. Anyone who wishes to challenge that statement will have an uphill battle awaiting them in court. However, some family members may consider the trouble worth the effort and erect barriers to your chosen agent to ensure that your wishes aren’t carried out. In such a case, having a court-appointed agent may be a better option.
Appoint Responsible Representatives
When you’re planning your estate, you’ll need to have trustworthy people acting in positions of trust. Individuals appointed as executors and trustees to the estate need to have your best interests in mind. Those granted power-of-attorney should also be trustworthy since their input would be required to ease the distribution of assets. While many people opt to appoint a single individual for each position, it’s better to have redundancy. Appoint multiple people to roles so that you can have a backup. If possible, avoid appointing people to multiple positions of trust.
Don’t Overlook Joint Assets
When you die, your estate will enter probate. Depending on the country or state that those assets are in, the probate process may take a long time. As a workaround, many property owners have set up joint assets with their adult children. Their death would transfer complete ownership of the property to the child without the need for lengthy probate. There are side effects to this process, however. There is no accounting for human emotion or greed, and situations like this may cause unwanted family strife. As with all planning initiatives, you should weigh whether the benefits are worth the investment.
Being Prepared for the Inevitable
As a human being, the only eventuality that is guaranteed is that someday you will die. There’s no handy timer that will tell you when the time will come, and so there’s no way to tell when it’s too late to do anything. The best time to seize the moment for planning your estate is today. Each day you leave it in doubt, you risk your estate becoming mired in controversy one more day. Don’t leave the distribution of your estate to chance. Do what you can today to ensure that your family is well taken care of in the event of your untimely demise.