My church has been having VERY helpful classes lately that I wish you all could come to. You may remember last month I posted about our First Aid / Basic CPR class. This month we learned about Estate Planning from a lawyer. While this is a topic most people don’t want to think about, it’s very important to do at least some basic estate planning as soon as you have any assets and/or dependents. Now here is my disclosure … I am NOT a lawyer, I took notes as best I could with a baby in my arms, and this stuff scares and confuses me a little. Consult your own professional as each family’s needs and wants vary greatly. And on that note, here is a general overview of what we learned about.
Benefits of Estate Planning
- Avoid having your assets tied up in probate
- Clear directions on what will happen to your children should you and your spouse both pass away
- Beneficiaries can pay less inheritance tax
- Allows YOU to make decisions, rather than the courts
- Peace of mind in knowing things are taken care of
CREATE A WILL
A will is the foundation of your estate planning. Without a will the courts will decide what happens to your children and your assets, and your family that is left behind could be in for a mess. Your will should include the following items:
- Nominate a guardian for any children you have
- List your assets and how you want them distributed
- Name an executor of your estate to take care of fulfilling your wishes
A few things to consider:
- Beneficiaries on life insurance policies and financial accounts will take precedence over a will, so make sure they are all updated appropriately.
- EVERYONE that has assets should have a will.
- Review your will each year, modify it should any major life changes occur such as the death of a beneficiary, addition of new beneficiaries, major changes in financial situation, etc.
- Don’t hide your will in a safe deposit box. Keep a copy somewhere your family can easily find it.
ESTABLISH A REVOKABLE TRUST
A trust is used to distribute your assets without the use of courts or attorneys. If a husband and wife both put their assest into a trust, only ONE inheritance tax is charged rather than one on each of them (I wasn’t exactly sure what this stuff means but it sounds like a way to let your heirs keep more of a your money which is a good thing, hehe). Here are some things to note about trusts:
- Money and assets in your trust are not protected from lawsuits against you.
- IRAs should not be included in the trust as they are able to roll directly into the IRA of an heir with no penalties
- You should select ONE trustee to manage the assets in your trust according to the directions you leave in your will
- The trust should be updated if your trustee changes or your beneficiaries change
- You should include a “Pour-Over Will” which is a safety net to administer property that is not in your trust due to accidental exclusion or that was acquired after your death
HAVE A LIVING WILL
Having a living will allows you to decide whether or not you want to remain on artificial life support when there is no chance of recovery. It relieves your family of the burden of having to make that decision. This is a very good thing to have.
HAVE A DURABLE POWER OF ATTORNEY
A durable power of attorney allows you to name someone of your choice to handle your affairs in the event that you become unable to do so. You can specify what those circumstances are.
If you have less than $10 million in assets, these four documents should be sufficient for your needs and are very reasonably priced to have established. If you have more than $10 million you will need to explore some more complex estate planning options.
Hopefully that was a helpful little overview for you. Now you should be able to at least know some of the questions to ask if you go to have a meeting with a lawyer to get your affairs in order. Please remember we’re not trying to give legal counsel, just give you some things to think about for you to research further.
For an updated post including a video on this topic visit Do You Need a Will or Trust?
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-Jodi Weiss Schroeder