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Managing and distributing the assets of your estate requires planning who or what will receive your assets before or after your death or due to incapacitation. Your goal is to make sure your beneficiaries receive your assets in the most pain-free way possible.
You may view estate planning as something typically done by older people, but estate planning can help you at any stage of your life to establish a foundation that you can fine-tune as your personal situation changes. And it's not just for the rich.
Regardless of your income level or amount of assets you have, you need to think about how you want your financial and personal assets to be distributed or handled in the event that you die or are incapacitated. It's important what happens to your stuff, and your family relationships depend on how it's handled.
Here are seven steps you can take to begin planning and managing the assets of your estate.
You may think you don't have enough to justify managing the assets of your estate, but once you start the process, you'll be surprised by all the tangible and intangible assets you have.
The intangible assets in an estate may include:
Once you've cataloged and taken inventory of your tangible and intangible assets, you need to estimate their value. That's easy when you have outside verification, such as a recent appraisal of your home or the statements from your financial accounts.
When you don't have an outside valuation, value the items based on how you expect your heirs will value them. This can help ensure your possessions are distributed equitably among the people you love.
Once you have a sense of what's in your estate, you can consider ways to protect it and keep your family together during difficult and stressful times.
You also should spell out, after consulting with the other person, your wishes for your assets and other considerations for your family. Don't presume that family will know your wishes...they should be clearly defined and communicated before you die or are incapacitated.
Estate planning is key to directing your assets once you're gone, but a complete plan also includes important legal directives that could come into play before then.
If turning over everything to someone else concerns you, consider a limited power of attorney. This legal document does just what its name says: It imposes limits on the powers of your named representative. For example, you could grant the person the power to sign the documents on your behalf at the closing of a home sale or to sell a specific stock.
Consider carefully the people you grant power of attorney. These people could literally have your financial well-being - and even your life - in their hands. You might want to assign the medical and financial representation to different people, as well as a backup for each in case your primary choice is unavailable when needed.
In some cases, a trust might also be appropriate. With a living trust, you can designate portions of your estate to go toward certain things while you're alive. If you become ill or incapacitated, your selected trustee or executor can take over. Upon your death, the trust assets are transferred to your designated beneficiaries, bypassing probate, the court process that may otherwise distribute your property.
While your will and other documents spell out your wishes, they aren't all-inclusive.
Don't leave any beneficiary sections blank. In that case, when an account goes through probate, it will be distributed based on the state's rules for who gets the property. Inheriture can help keep all this in order.
Also be sure to name contingent beneficiaries. These backup beneficiaries are critical if your primary beneficiary dies before you do and you forget to update the primary beneficiary designation.
It's worth hiring an attorney or estate tax professional to help create your estate plans. As with the question of whether you should hire a tax preparer or turn to tax software, the answer generally depends on your situation.
When your estate is small and your wishes are simple, an online or packaged will-writing program may be sufficient for your needs. These programs typically account for state-specific requirements and walk you through writing a will using an interview process about your life, finances and bequests. You can even update your homemade will as necessary.
However, it might be worthwhile to consult an estate attorney and possibly a tax advisor if you have any doubts about the process. They can help you determine if you're on the proper estate planning path, especially if you live in a state with its own estate or inheritance taxes.
In cases of a large and complex estate - think special child care concerns, business issues or nonfamilial heirs - an estate attorney and tax professional can help you maneuver the sometimes complicated implications.
Professionals can help in the future as your circumstances change. Use an online asset management and distribution software program like Inheriture to adjust and communicate your plan as needed.
Periodically assess your estate plan and make changes as necessary. You should revisit your final wishes whenever your circumstances change, for better or for worse. This may include a marriage or divorce, birth of a child, early distribution of assets, loss of a loved one, getting a new job, or being terminated.
Even if your circumstances don't change, it's still a good idea to evaluate your estate plan periodically. While your situation may be the same, laws may have changed.
It will take some effort to revise your plan, but rest assured Inheriture will make this process as easy as it can be.
