It’s essential to be prepared for one’s passing. Proper estate planning can ensure that money and property are passed on to intended beneficiaries.
There are several things to consider when it comes to planning how your assets will be distributed. What are some of the most important aspects?
Take stock of what you own
Before anything else, it’s crucial first to know what assets — tangible or intangible — are under your name.
Make an inventory of all the things that you wish to pass on to beneficiaries. Some of these could include:
- Personal possessions such as books, journals, and furniture
- Real estate such as land or condominium units
- Insurance policies and retirement plans
- Savings accounts
Take note of which assets should be best given to a particular loved one. Work with an attorney specializing in wills to find a just way of dividing and distributing your estate.
Plan how family and other beneficiaries will be taken care of
There are several ways to go about this.
Go through all the insurance and retirement products you purchased in the past. Make sure that the list of beneficiaries are up-to-date and not odds with statements made in the will. Stated beneficiaries in insurance or retirement plans often override the latter.
In some cases, primary beneficiaries will pass before you do, and it leaves your assets in a tricky situation during probate. So best to also assign secondary or contingent beneficiaries.
If you have children, make sure to designate a guardian who will take care of them until they come of age. To plan for the unexpected, assign a second guardian who can take the first one’s place.
Additionally, you can also entrust someone to oversee any assets that you leave for your children temporarily. Some choose to assign the same guardian for this role, but you can opt for a different person.
Bestow a power of attorney
Incapacity can also be a barrier to achieving specific wishes. A severe ailment could prevent you from handling your legal and financial affairs.
This is where a durable power of attorney becomes useful. It allows you to give a trusted person broad-ranging authority to handle essential matters when you become incapacitated. Thus, your agent will be able to pay your taxes and manage your property on your behalf.
Alternatively, you can also confer a limited power of attorney. With the latter, there will be explicitly stated limitations on what your agent can do with your assets and transactions.
Exercise caution and good judgment when you grant someone a power of attorney.
Take into account relevant estate tax laws
Taxes will still be a significant consideration for some estates. While most estates don’t have to pay federal taxes, those that are considerably large might not be exempted.
At the state level, some jurisdictions will impose an estate or inheritance tax. The specific process and the tax rate might not necessarily match federal guidelines.
Find out if the state where you reside can tax your estate and your beneficiaries’ inheritance. Then prepare accordingly. Work with your estate planning attorney to avoid leaving your heirs with surprises.