Estate planning is not something most people look forward to doing. But the more you put it off, the more you put your family’s future in jeopardy.
An estate plan is critical, especially if you have assets you wish to bestow to your family and friends after your death. An official and legalised estate ensures that your last wishes are carried out successfully.
While estate planning is a complicated process, it is vital to start working on it sooner than later. Here are four steps to make estate planning a lot easier.
Determine your net worth
Smart estate planning begins with calculating your net worth. You can easily make a quick calculation of your net worth by adding up the values of all of your assets:
- Bank and investment accounts
- Personal property (vehicles, jewelry, collectibles)
- Retirement plans
- Real estate
- Businesses
- Death benefit of life insurance
Once you have a total count, subtract from that number the sum of all of your liabilities:
- Personal loans
- Mortgages
- Car loans
- Credit card debt
The difference is your total net worth. Know if your estate is subject to inheritance taxes and factor in the necessary deductions accordingly.
Hire a qualified attorney
Estate planning requires technical and legal expertise. An experienced estate planning lawyer can walk you through the process. They will explain the legal jargon and government regulations to help you create a valid and stress-free will for your family.
Avoid homemade or do-it-yourself wills, and never affix your signature on important documents without your attorney’s guidance. When it comes to wills, a single error, typo, or missing word can invalidate the entire estate plan. Mistakes can change the whole meaning of a will or a trust. Failure to observe the appropriate formalities can also end badly for you and your family.
Decide if you need a will or a trust
A last will is a legal document that indicates your assets and their corresponding beneficiaries. It covers any property that is under your name when you die and does not include property held in a trust or a joint tenancy.
A trust, on the other hand, only covers assets that have been formally transferred to the trust.
A key difference between a will and a trust is that a will is required to pass through probate. That means a court administers the will, verifies its validity, and ensures all assets are distributed as instructed by the deceased.
In contrast, a trustee, not the court, is in charge of trust management, which can save you more time and money. A trust also remains private, unlike a will that automatically becomes part of public record.
Wills and trusts both have their pros and cons. A will lets you name a guardian for your children, while a trust does not. On the other hand, a trust can be leveraged to plan for disability or anticipated medical conditions. Consulting with your attorney will help you make an informed choice.
No one knows when death will arrive. Preparing for the worst can make a huge difference down the road. Through estate planning, you get to protect your family’s future and save them from extra stress during a difficult time.