Estate planning is for all. We all have an estate, whether large or small which we can’t take with us when we die and must plan for in advance. Everything you own is considered your estate. These are tangible and intangible assets such as furniture, real estate, vehicles, savings accounts, investments, life insurance, and other personal possessions. They should be planned for in advance and properly documented. What documents needed for estate planning must be at the back of your mind from the start.
What Does the Term Estate Planning Mean?
You may ask yourself, what is estate planning and why the buzz? Answering this will help you know what documents needed for estate planning as you get into it. Estate planning determines how your assets are maintained, managed, and distributed when you die or become incapacitated. It is a complex process that ensures your final wishes are respected. It can express specific details like cremation services you opt for when you cross over. The complexity can be overwhelming. Work with a professional estate planning attorney to get the fine details captured. A comprehensive estate plan includes a will, sets up trusts or makes charitable donations if the intention is to limit estate taxes, names executors and beneficiaries, and sets up funeral arrangements. It can detail even the funeral homes that will handle your remains when you die.
What Is the Best Time to Plan Your Estate?
When you already know what documents needed for estate planning then the next important question you ask yourself is when should I start? Now is the best time to plan your estate. Life is uncertain. You cannot leave things to fate or chance since you don’t control the next moment. Thinking about your mortality is not pleasant but unavoidable. Death or incapacitation catches most families off-guard, but you can change that by planning. It is why you must plan your estate. Do it when you are healthy and of a sound mind to avoid inconveniencing surviving family members when you are dead. Now is the best time to call an estate planning lawyer and get things in order before it is too late. Knowing everything is planned. It ensures the instructions for protecting your family are in place when you are gone. It gives you and your family peace of mind. It is also a thoughtful and considerate gift you can gift your loved ones. It may mean more to them after your demise than the expensive diamond rings you gave them on a special occasion.
What Assets Are Considered in Estate Planning?
An asset is any property owned by the deceased at the time of death. They are physical and non-physical possessions. Estate planning assets examples include real estate properties, artwork, savings accounts, certificates of deposits, ownership in a business, vehicles, household furnishings, computers, life insurance policies, investments in stocks, bonds, and mutual funds, and jewelry items such as a diamond engagement ring owned by the deceased. Debts owed to the deceases are also assets. Retirement accounts are not treated as part of your estate if you name a beneficiary because they go directly to them at your demise. It is an important part of the information you must have when working on retirement planning for future security. The legal proof of your assets is important when considering what documents needed for estate planning to help beneficiaries and executors trace and claim your assets.
Who Needs Estate Planning?
Estate planning is critical for everyone. It is not exclusive to retirees or the wealthy.Most people often think about it more when they get older. Sadly, no one can predict how long they will live. An accident or an illness can happen to anyone of all ages. Estate planning has more impact on families with modest assets from experience. It saves them the loss of time and assets, which is more detrimental to them in the absence of an estate plan. Learn what documents needed for estate planning now despite your age or wealth status to save the day when times get tough.
Why Do Many People Ignore Estate Planning?
Estate planning is often ignored based on the assumptions that people don’t own enough or are not old enough. Others also find it either confusing or costly. Some live with the illusion that they have plenty of time to do it later. Other people don’t know where to begin or who can help them, while others don’t just want to think about it. The truth is that estate planning is not expensive if you compare it to the option of avoiding it. The unintended costs and consequences on your family at your death are critical to ponder. They should make you ask what documents needed for estate planning and look for attorneys to help your affairs in order. They will provide critical guidance and properly draft the documents to meet your objectives. It is vital for your peace of mind. You rest assured that things have been taken care of when you are no longer around to take care of them.
Why Is Estate Planning Important for You?
Estate planning benefits people from all walks of life, not just the wealthy. It guarantees that your assets are properly taken care of after your death. It takes more than a will for estate planning. A checklist ensures your assets are seamlessly transferred to your heirs and authorized beneficiaries. It also offers you an open window to include provisions allowing family members to access and control your assets while still alive when you get incapacitated. It not only gives you peace in the knowledge that all is well when you die but also comfort that things can be taken care of when you are alive but unable to manage and take care of your assets. They can take charge of your property and save you the costs of a realtor when misfortunes happen.
Planning also helps you to organize important records, correct titles, and apportion beneficiary designations. Your family can trace your financial records, insurance policies, and titles if something happens to you. Many ask for what documents needed for estate planning but give little thought to the wording on titles and beneficiary designations. Innocent errors can overrule good intentions and cause problems at your death or incapacitation. It can invalidate the beneficiaries. On the other hand, naming the wrong beneficiary on a tax-deferred plan leads to devastating tax compliance consequences. Prior correction of beneficiary designations and titles will save your family time and costs for attorney fees in the future.
How Is an Estate Plan Initialized?
An estate plan begins when you write a will or establish a living trust. Documents are paramount to provide proof and clear reference points for instruction. It is vital to ask what documents needed for estate planning before setting things in motion.
1. A Written Will
It is a legal document that directs the distribution of assets under your name without a governing contract or beneficiary designation upon your death. A court probates the will. It is expensive due to court costs, executor commissions, and attorney’s fees. It disadvantages your family and the beneficiaries because the courts control the timing of distributions instead of them. Jointly-owned assets cannot be probated unless a designated beneficiary is not named. The court will require guardianship to be stated for minors until the legal age of eighteen to twenty-one. It is a top document when considering what documents needed for estate planning to start. It allows you to plan your funeral and state headstone specifications if you wish.
2. A Revocable Living Trust
Most families and estate planning gurus prefer combining a pour-over will with a living trust. It establishes and funds a trust that avoids probates to execute in the event of death. Trusts prevent courts from controlling your assets when you become incapacitated. The poured-over will inclusion ensures that your assets are not covered in the trust during your lifetime and are added to it when you die. It provides increased privacy. Most people prefer it because you can change the governing instructions at any time. and it continues long after your death, unlike probate, which ends at some point.
Trustees can manage your assets until beneficiaries reach the legal inheritance age or longer for loved ones with special needs. It prevents spouses and parties from irresponsible spending. Creditors cannot also access the assets when going after beneficiaries. It provides the best for future generations. A combined trust and pour-over will is slightly expensive but offers more value than a will. You avoid fees and costs in the future due to court involvement, but even more, you can manage your assets in a trust when you are alive since it doesn’t take away your control. Consider a living trust when drafting what documents needed for estate planning for more freedom and control.
What Are the Important Documents for Estate Planning?
Effective estate planning is anchored on proper legal documentation. Ask what documents needed for estate planning from the start. There are five documents you must be familiar with in your estate planning documents checklist.
1. The Last Will
The last will and testament is the foundation of a solid estate plan. It specifies the executor of your estate, its powers, and its responsibilities. It also specifies the beneficiaries and how to transfer property to them. It also appoints the guardians where minors are involved until they reach the legal age to take up the inheritance.
2. The Living Will
The living will is a legal document often confused with the last will. It is also known as an advanced healthcare directive. Unlike the former, it clarifies how to make treatment decisions on your behalf when you can’t communicate. You can specify if you want to be kept alive with machines and feeding tubes or not if an accident or a disease puts you in a coma and you cannot recover. Making the decision ahead of time saves your grieving family members the agony. The will ensures your decisions are respected even when others may not agree with them.
3. The Healthcare Power of Attorney (POA)
It is a legal document that appoints a
primary and backup agent to make healthcare decisions on your behalf when you cannot. Spouses are the most common primary agents. A health POA ensures that doctors and everyone honor your wishes even if it is not what they want.
4. The Durable Power of Attorney
It is a legal document that appoints and empowers an agent to act on your behalf on financial decisions when you are incapacitated. The agent can be a spouse or anyone else with limited or broad authority to handle your financial affairs. A durable POA can be revoked at any time. Its validity ceases upon death. You can include a springing clause to effect it immediately after a medical doctor certifies your incapability to manage your affairs.
5. The Revocable Living Trust
It is a legal document created during one’s lifetime that transfers assets into a trust for specified beneficiaries. The transfer does not go through probate court proceedings to be actualized. Individuals with multiple beneficiaries and complex estates opt for trusts. Every asset size can be put in trust since there is no threshold on asset size. It saves on the costs and the cumbersomeness of probate since the trustee transfers the assets to your beneficiaries as per your wishes at death. Another advantage is that it allows you to manage your assets in the trust when alive and capable since it does not take away your powers over the assets in the trust.