Without a doubt, no one likes to contemplate their own death. This often translates into many people being unwilling to sit down and start preparing for this inevitability, which can have serious legal consequences down the road. In fact, according to statistics from the National Association of Estate Planners & Councils, over 120 million Americans do not have plans that will protect them and their families in the event of their sickness or death. Notwithstanding, a carefully crafted estate plan is of the most crucial gifts you can give to yourself, as well as to the loved ones with whom you expect will carry out your wishes upon your passing. Moreover, an estate plan further provides you with the peace of mind that your assets will be protected, and that they will be distributed in accordance with your specific instructions. With this in mind, there are certain steps that you can take to start the estate planning process, which include the following:
1. Speak with an estate planning attorney. The first step in the estate planning process is to speak with an attorney who is qualified to handle these types of matters. An estate planning attorney is in the best position to advise you of all of your legal options in light of the assets you own and also, to help you determine which individuals you feel will most effectively carry out your wishes.
2. Determine who gets what. Before you start crafting a will, it is best to know exactly how your assets should be distributed upon your death. For instance, you may want your grandson to have your model train set, or, for your granddaughter to inherit a precious piece of jewelry passed down through the family. While these issues may seem trite during life, they can become the subject of debate among surviving family members should you fail to have a directive in this regard. Overall, it is never recommended that people underestimate the importance of this step and assume that family members will simply work things out among themselves. As we have seen in our many years of estate planning practice, things hardly ever go as planned.
3. Review and update your beneficiary designations. Life insurance policies, retirement plans, and accounts that are “payable-on-death” all qualify as contracts in the sense that those you designate will inherit them directly. As such, be sure to update your beneficiary designations soon after you experience any type of life-changing event, such as a marriage, divorce, death of a spouse or child, or adoption/birth of a child.
4. Select a qualified executor to handle your estate. An executor is the person you designate as responsible for paying all of your debts and distributing your property in accordance with the terms of your will. The most popular choice for many individuals is to choose their eldest child or spouse however, for some people, they may wish to consider other options – especially if settling their estate will be complex or highly time-consuming. People can choose a professional executor to handle their affairs, whether it be a trusted advisor or accountant, who has the experience and impartiality necessary to get the job done right.
5. Advise your loved ones as to where you store your vital documents. One of the worst things possible is when someone dies and their family members are scrounging around trying to find the decedent’s estate planning and other vital documents. In this view, it is a good idea to prepare a list that shows where everything, including estate planning documents and valuable assets, are located. Also be sure to provide the name of all those with whom you wish to assist the executor of your estate, including your attorney, accountant, and stock broker.
6. Consider giving gifts. To offset future estate costs, you can make annual tax free gifts of $13,000 to family members and/or friends. Couples can gift a total of $26,000 per recipient. Additionally, the future appreciation on assets that are gifted to others will ultimately be transferred out of the estate when the gift-giver dies.
7. Make a living will. No one ever expects to become too ill to render their own decisions however, it does happen. Also called a healthcare directive, a living will provides a list of your wishes and desires as to the medical procedures you do or do not wish to have in the event you cannot choose for yourself. You also can appoint a healthcare proxy, which is a person with whom you designate to make healthcare related decisions on your behalf that are not addressed in your living will.
8. Draw up a power of attorney. If you are rendered incapacitated or otherwise incapable of managing your own financial affairs, a durable power of attorney allows you to designate a person to pay your bills and manage your finances during your infirmity. The reason why this is important is that a will only speaks to your affairs upon death, and a living will only addresses medical issues.