According to data from the National Association of Wealth Councils and Planners, more than 120 million Americans do not have up-to-date plans to protect their families in the event of accident, illness or death.
Getting the estate planning process in motion can be the most important gift you give your family so that your loved ones are not left with uncertainty and conflict. These five steps can help you start the process and provide clarity to your family about your final wishes.
1. Create a will
If you die without a will, the court will decide what to do with the assets, debts, and even your children. This is called dying intestate and leaves the distribution process up to the law of the state where you reside. To write a valid will, just focus on indicating exactly who you choose to inherit your property and also write down who you want as guardian for your children in case something happens to the other parent as well. If proper planning is not completed, your family will be trapped in probate court, which is time-consuming and expensive.
2. Consider a trust
If you want to avoid the probate process entirely, consider establishing a revocable trust. If you keep your assets this way, you are essentially transferring ownership of your property to a trust that includes exact details about the distribution when you pass away. Because the information is contained in a document, you can skip the sequence entirely.
3. Set up life insurance
Life insurance is a smart idea, especially if you have young children, own a home, or probably owe a large amount of inheritance taxes after your death. You will need to make sure you have adequate coverage so that your family covers all your expenses when you are no longer there to help. Consider purchasing term life insurance, which can be an affordable option as it pays a fixed premium over the life of the term.
4. Gather documents at the end of their useful life
Beyond wills, trusts, and life insurance, critical estate planning should also include gathering three important end-of-life documents. To help your loved ones follow your wishes when you cannot, you should make sure they have these three documents:
– A power of attorney that allows your designated agent to manage your legal affairs and financial situation.
– A form that allows the release of information from your physicians to elected representatives.
– An advance directive form appointing someone to make medical decisions when you are disabled and a living will to detail exactly what medical treatment you want when your life is ending.
5. Know your inheritance taxes
Although most estates will not owe tax, if you have a taxable estate worth more than $ 5.43 million, it is important to understand how much you will owe and how to strategically minimize that amount. For example, if you leave all assets to your spouse, that distribution will be tax-exempt.
Despite the critical nature of the estate planning process, starting the conversation can be difficult. By making these simple steps a priority, you will have peace of mind knowing that you have done everything you can to protect your family after your death.