Have you ever considered what will become of everything you own at the time of your death, or who will raise your children if they are minors? Don't assume your home, bank accounts, insurance policies, and any other assets you have will be distributed according to your wishes, or the person you want to raise your children will, in fact, be allowed to raise them. If you haven’t done the necessary planning, you don’t have control over what happens after your death.
CPAs and financial planners recommend that you develop an estate plan as soon as possible so you can transfer your property exactly as you choose. Effective estate planning may also help you minimize the taxes on your estate and maximize the inheritance for your heirs.
Components of an estate plan include, but are not limited to, the following
With a Will, you direct to whom, when, and in what amounts your assets will be distributed. You also select the executor, the person who is responsible for the disposition of your estate.
A living trust is a document you establish to own your assets. While you still control the assets during your lifetime, the assets will avoid going through probate when you die and will be distributed to your family members. See below for a discussion of probate.
In your will, you can specify the person who will serve as the guardian of your minor children.
You can specify who will manage your children’s inheritance, how the money is to be spent, and at what ages your children will receive the money directly. You can even set up trusts to protect your children’s inheritance from their creditors, spouses, and future estate taxes.
Power of Attorney for Health Care
This document allows you to name a person who can make medical decisions for you if you cannot make them for yourself.
Power of Attorney
This document gives one or more people the power to act on your behalf.
What is Probate?
Probate is a legal process that takes place after you die. It typically involves paperwork and court appearances by lawyers. The lawyers and court fees are paid from estate property, which would otherwise go to your family members. Probate usually takes eight months to 1 1/2 years to complete and is very expensive. A probate of $1 Million in assets can cost more than $40,000 in probate fees. In addition, if anyone wants to find out how much you were worth when you died, what assets you owned and what your family will be inheriting, they only need to visit the courthouse and look at the probate file. YOU CAN AVOID PROBATE BY CREATING A LIVING TRUST.
Planning for your survivors should begin right away and should be reviewed periodically to make sure that your wishes are properly reflected in your estate planning documents.
Work closely with a CPA, financial planner and an estate planning attorney to develop an estate plan that reflects your personal objectives.