5 Tips to Getting Started with Estate Planning
July 9, 2024
Estate planning may seem like a financial move reserved for the wealthy, but it is an important task everyone should pursue. It ensures that you have a comprehensive plan to manage your legacy and distribute assets in line with your wishes. It affords confidence for you and your loved ones.
If you haven’t given thought to this important financial planning measure yet, these tips will help you get started.
Understanding the Basics of Estate Planning
Estate planning involves creating a strategy for the management and distribution of your assets after your death or in the event you become incapacitated. At its core, it provides written documentation that outlines your wishes and protects your loved ones. Key documents in estate planning include a will and a living trust. Key tasks include appointing people, like a power of attorney, to act on your behalf. These documents and plans collectively outline how your assets should be handled, who can make decisions on your behalf, and what your medical preferences entail if you are unable to communicate them yourself.
Start with a Will
Creating a will is one of the simplest and most crucial steps in estate planning. This comprehensive document outlines specific details on how you want your assets distributed. A will should also name guardians for your minor children and designate an executor to manage your estate. A will is a legal document that is straightforward to create and can often be written using online tools, with sites like Trust & Will 1 or LegalZoom 2, or through a basic consultation with an attorney. Having a will in place ensures that your wishes are clear and your assets are handled appropriately; this can prevent potential disputes among your heirs.
Consider a Living Trust
A living trust is a tool that can help your estate avoid the probate process, which is a legal operation to verify the authenticity of your will and pass assets to designated heirs. The probate process can be lengthy and costly. A living trust can help bypass it by covering any gaps that may exist in your estate plan or topics not addressed within your will. A living trust is often more important for those with complex estates 3, including people who own multiple properties or have sizable investment accounts. It can provide a smoother transition for your beneficiaries and help keep your financial affairs private.
Appoint Key Roles
When setting up your estate plan, it’s essential to appoint individuals to key roles, including an executor, a power of attorney and, if applicable, a guardian for your minor children. An executor executes on the terms of your will, ensuring that your assets are distributed as you intend. A power of attorney is designated to make financial or medical decisions on your behalf if you cannot. Finally, appointing a guardian for your dependents will ensure their care and well-being in your absence. This individual should be someone you trust to manage your affairs. It’s important you engage them in conversation around your plans, so they are clear on your wishes ahead of time.
Review and Update Your Plan Regularly
Life is full of changes, and your estate plan should reflect them. Major life events such as marriage, divorce, the birth of a child, or significant changes in your financial situation, including loss of a job or retirement, will likely require updates to your plan. Regularly reviewing your estate plan, ideally every few years, helps ensure it remains aligned with your current wishes and complies with any new laws. Keeping your plan up to date is vital to ensuring your intentions are honored.
Starting your estate planning journey may seem overwhelming, but taking these initial steps can provide a solid foundation for your assets and loved ones well into the future.
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This information is for informational purposes only, is intended to provide general guidance, and does not constitute legal, tax, or financial advice. Each person’s circumstances are different and may not apply to the specific information provided. You should seek the advice of a financial professional, tax consultant, and/or legal counsel to discuss your specific needs before making any financial or other commitments regarding the matters related to your condition.
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1 Retrieved from: https://trustandwill.com/