In basic, easy to understand terms, estate planning is the arrangements that a person makes at some point during their life for the management and distribution both during their life and after their death dealing with gifts, transfer tax, generation skipping, etc. Making arrangements for life situations is actually done by 72% of seniors. This is called a living will. Drafting a will is not typically a long process. It can often take no more than 15 minutes. A will is often drawn up and executed by an estate planning lawyer. A will, along with a living will and a power of attorney, are said to be the most important documents to have. Depending upon a person’s assets, a consultation with an attorney is a good idea at the beginning of the process to find out about the legalities involved.
Estate planning encompasses several important issues. The first is actually making a will that names beneficiaries and, in the case of young children being left without their parents, naming who will be appointed legal guardian. A suggestion regarding properties would be to consider holding the property in a trust while the person is still alive, so that procuring their inheritance will not be a difficult process for the beneficiaries.
Healthcare directives are an important aspect of the decision making process concerning an estate. Putting down healthcare wishes in case the person becomes unable to answer on their own will save loved ones from having to make difficult decisions when the time comes. Family members will be able to know that the choices made are the right ones and the ones their loved one wanted. Part of healthcare directives are the execution of a living will and a power of attorney for health care reasons. This appoints one person of choice to be able to make decisions in the place of the patient should the need arise.
A financial power of attorney is also advised to handle property and finances in the case that the person becomes unable to do this him or herself. The person appointed is called the agent, or, although they do not need to be a lawyer, an attorney-in-fact.
In cases where there are minor children left with an appointed guardian, it is best to designate an adult to take charge of the property or finances they are to inherit. The person appointed to carry this out can also be the same one selected as the children’s guardian.
When naming beneficiaries for bank accounts, properties, and retirement plans means that upon the death of the owner, those accounts are automatically paid to the chosen inheritors. Preparing this in advance will save a lot of stress for family members when the time comes. It is also recommended that when consulting with an attorney about estate planning, the possible necessity of life insurance be addressed. In some cases, a person does not need to purchase life insurance, especially if they lack the extra funds to meet the payments. There are, however, circumstances under which life insurance might be helpful in providing for children if and when it becomes necessary.
Understanding estate taxes is an essential part of estate planning. Most estates will not have to pay federal estate taxes. The only time paying this tax becomes necessary is when the worth of an estate is above $5.45 million.
Planning to pay for a funeral is another essential step in the estate planning process. Because it has been found that funeral prepayment plans are not very reliable, people have begun setting up a special bank account in which to hold the funds that will pay for a funeral, along with related expenses. This is referred to as a payable-on-death account. Family members should also be informed of their loved one’s wishes regarding organ donation and disposition of their body upon their death. The less that families have to try to navigate through during a difficult time, the better.
Important documents should be stored in one place that is easily accessible. These documents include a will, trusts, deeds to property, life insurance policies, bank account and safe deposit box information, mutual funds information, retirement plans, IRA’s, information about debt, and any other important documents.