Almost everyone can agree that thinking about their mortality, the distribution of their assets, and creating an estate plan can be uncomfortable—to the point that they’d rather avoid thinking and doing these things until it’s too late.
However, creating an estate plan is a vital step everyone should take to ensure that their assets are distributed according to their final wishes and that their loved ones are cared for after their passing.
If you’re eyeing to create an estate plan, continue reading this guide to help you out:
Start With A List Of Your Assets
Starting with a list of assets is essential to determine what you own and can distribute. Having a list also makes it easy to know how you allot all your property once you pass away. The earlier you do this, the better.
List down all of your real estate properties, bank accounts, investments, personal property, and business interests. The goal is to have a comprehensive list to ensure all your assets are accounted for.
The next step is to assign or determine a value to each asset. If you want help with this process and other things related to estate planning, you can always get professional help from estate planning firms like Two Spruce Law Estate Planning. By the way, you don’t need to focus on the financial value of your properties. You should consider their sentimental and emotional importance to you as well.
Identify Your Beneficiaries
Once you know the value of your assets, it’ll be more transparent and much easier to decide who gets what. Now, the next step is to identify who’ll receive them. You need to know your beneficiaries.
Identifying your beneficiaries is a crucial step – it’s the whole point of an estate plan. These people or groups are the ones who’ll receive everything you’ll leave behind. They can be your family members, friends, charities, or other organizations.
Knowing who your beneficiaries are can help avoid potential conflicts between them and guarantee that you’ll be fair when distributing your assets. In addition to your riches, you should consider who’ll benefit from your life insurance policies and retirement accounts.
Choose Your Executor
An executor manages your estate and ensures your assets are distributed according to your wishes. They’ll be the ones who’ll handle paying bills, filing tax returns, and communicating with beneficiaries the moment things are over for you. Choosing a trustworthy and competent person to fill this role is critical to guarantee that your estate is managed correctly and that your wishes are carried out.
Of course, before you get an executor, discuss your plans with your family first. Let them know what you want to happen and how you and they can fulfill them according to your wishes. It may be understandable for you to keep a few things as a surprise; however, be sure that the secrets won’t generate discord between the people you’ll leave behind.
Do note that you’re not entirely required to have an executor. When people find your will with no indication of a designated executor, the courts may appoint someone who would fulfill that role. However, you’d rather have someone who has your best interests in mind. Typically, most people choose their spouse, parents, siblings, and adult children as their executors.
Another thing: pick another person to be an alternate executor. While it’s uncommon, assigned executors may fail to fulfill their duty. Sometimes, they may pass away before the one who owns the estate, or they just can’t. This is why you’d instead want to have someone next in line to guarantee that your last wishes are followed to the letter.
Create A Living Will
And since you’re already planning to get an executor and talking to your family, you may want to consider writing a living will too. A living will allows you to specify your healthcare wishes if you become incapacitated or unable to communicate. This can include decisions about life-sustaining treatments, end-of-life care, and organ donation.
In some places, living wills are referred to as healthcare proxies, advanced healthcare directives, and medical directives. Nonetheless, in some cases, healthcare proxies may refer to the person with the durable power of attorney for healthcare, which will be discussed in the next section.
Choose Your Agent
You should be aware of the power of attorney when creating a living will. Power of attorney is another legal document that gives a person the power to make decisions for you when you become incapacitated. These decisions may include managing your assets, paying bills, and making healthcare decisions. The one who’ll receive this is often referred to as an agent.
Do note that the power and responsibilities of an agent can significantly vary depending on the limitations imposed on them. Often, executors are chosen as agents as well. But keep in mind that depending on the size of your estate and the complexity of your will, becoming your executor and agent can be too much of a burden for a single person.
Set Up A Trust
Now that you’ve sorted out your assets, identified your beneficiaries, and chosen an executor, it’s not a good time to set up a trust. A trust is a relationship between a trustor and a trustee based on good faith, wherein the trustor will ‘trust’ the management and ownership of all assets they’ll include in the trust to their trustee.
Often, executors are assigned as trustees and vice versa. Having a trust can provide you with a few benefits, like reducing your estate taxes, protecting your assets from creditors, and providing for the long-term care of your beneficiaries.
When choosing a trustee, be very careful. Usually, most people would choose one of their kins to be their trustee. But you shouldn’t just do that because it’s the norm, especially if your estate is vast. Nonetheless, if you genuinely want one of your family members to have some power over your trust yet don’t trust them completely, you can turn them into a co-trustee with a professional trustee.
If you’re a single or widowed parent and your children will still be minors after you pass on, you should name a guardian and set up a trust for them as well. You should do this if you believe the surviving parent can’t provide the care your young children need.
Write A Will
Crafting a final will is essential in creating an estate plan because it allows you to specify how your assets should be distributed after you pass away. You can appoint the executor who’ll process everything you’ve written here. Plus, you can designate guardians for minor children and even pets.
Your will is the very core of your estate plan. Remember that without a will, your assets may be distributed according to state law, which may not align with your wishes. All the steps you’ve taken prior are crucial to the success of your will.
Your will can be as straightforward or as intricate as you want. Some who didn’t put much thought into writing end up with ‘I love you’ wills, where they only contain the deceased’s final words, often leading to everything being given to their surviving spouse or children.
In cases where the estate is vast, and there are a lot of assets to go around, some people may only partially rely on their will to distribute their estate. They may reduce the things they need to say goodbye to by gifting them while alive or once they feel their time to go is near.
Regardless, a will should precisely dictate everything that you want to happen after your death. There’s no room for misinterpretations and misunderstandings as they may result in the grief of those who survived you, which may result in them going through the arduous process of contesting your will.
Often, you can rely on a lawyer or attorney to assist you in writing your will. You have the option to get the help of agent services too. And, of course, you can write everything on your own and even use a template to follow.
If you decide to write it on your own, be sure not to forget to include the following:
- The title of your will. You must specify that the document is your one and true last will. Also, indicate your full name, the date you wrote it, and a snippet to inform the readers that it’s your previous version of the will.
- The names of the people who’ll be critically involved with the will. First and foremost, indicate your executor and alternate or backup executors. Then don’t forget about the name of the guardians you’ll assign to your young children.
- The list of items and assets you want to distribute. Some assets can be distributed through a will (e.g., properties under joint ownership, established trusts, et cetera).
- The names of the beneficiaries and the things they’ll receive. Also, indicate the names of the people you deem not deserving to receive any piece of your estate but may be assumed to be entitled (e.g., estranged spouses and children).
- A residuary clause. While optional, it’s to your benefit. A residuary clause is a statement that indicates that you’ll give all the assets and properties not mentioned in the will (residuary estate) or included in the trusts to be given to one or more residuary beneficiaries.
Once your will is complete, sign it in front of a few witnesses. When signed, it’s time to keep that will in a safe place where it can be accessed later when you pass. Also, be ready for the time when you suddenly change your mind and want to update your will. Such situations are plenty common.
Creating an estate plan is crucial in ensuring that your loved ones are cared for after you’re gone. Following this guide, you can create a plan to give you peace of mind and protect your assets. Don’t wait until it’s too late—act now and create your estate plan today. Remember, you can always seek professional help if you need it.