Tips to Consider When Coming Up with an Estate Plan

Having an estate plan is an excellent way to reduce chaos in your demise and at the same time ensure that everyone gets what you want them to. For you to create a plan you need to consider a number of tips. These tips include:

Be clear about your intentions

Why are you creating the plan in the first place? You need to have a clear reason. Of course, your estate planning attorney can help you come up with a reason, but it should mainly come from you.

Most estate plans are motivated by tax planning, which is an important consideration in wealth transfer, but it is not the only one.

Understanding and expressing the “why” behind the planning can help alleviate the dread of the unknown, which can frequently lead to misunderstanding among family members, conflict among beneficiaries, and loss of family wealth.

So, how do you get started on the road to communication? The first step is to understand your values and how they affect the plan you put in place. Keep in mind that your values may differ from those of your heirs, or they may be the same but expressed differently.

Understanding your values is not intended to control your plan from beyond the grave by imposing those values on future beneficiaries, but rather to provide context for the many structures you have (or have not) implemented.

Understanding these underlying beliefs will help you stay grounded if you confront challenging inquiries from family members about the plan, as well as remind you why you did it.

Aim to build a values-based plan

A clear grasp of your basic beliefs is critical in determining your intentions for the assets you will distribute to or hold for your heirs. Discretionary trusts are a popular planning tool because of their flexibility and creditor protection, but they can keep trustees in the dark about distribution decisions.

Creating a non-binding side letter of wishes to advise a trustee can help maintain the values that guided the planning across generations while also lowering the likelihood that assets in the trust would be dispersed and spent in an unforeseen future.

Explaining why you funded a trust, aside from tax concerns, might be challenging. Writing a letter of wishes needs you to consider what the assets are for (and are not) and how you intend to use them to benefit present and future dependents.

For example, you can finance a trust with the aim of using it mostly for educational purposes but are hesitant to include that provision in the trust instrument due to uncertainties about the beneficiaries’ future needs or the expense of education.

You might finance a discretionary trust and write a letter of wishes stating your desire for the assets to be spent largely for education and why this was a significant motivating factor in establishing the trust.

This would allow the trustee to maintain flexibility while ensuring that beneficiaries understand the trust’s purpose and why specific distribution requests may be allowed or denied.

Letters of wishes may also include information on distributions that may be made if specific conditions are met. For example, the letter may say that beneficiaries would receive specific sums or percentages of trust assets at certain ages or milestones.

The trustee would not be required to make these distributions, which is important especially when there are reasons to keep assets in trust for a beneficiary or make payments on their behalf; however, guidance like this can be useful to a trustee administering the trust years after it is funded, especially if they were not involved in the trust creation.

Share the plan

Once all of the parts of the strategy are in place, the final stage is to share it, but probably not all at once. Sharing knowledge in digestible increments can maintain your family members’ attention and allow them to actively participate in the process by asking intelligent questions.

There is no one-size-fits-all method to this process, but it is frequently beneficial, to begin with some basic estate and financial planning education, which will serve as a foundation for the information you will give over time and assist your heirs in comprehending the many components of your plan.

This instructional element may also be useful for family members who need to start their basic planning.

Next, you may describe the work you did to discover the values that influenced your plan. You can talk about your aspirations for future generations and how your estate plan is designed to support those intentions while also addressing potential problems.

Many families then go on to share information on the various trusts or other entities they have established to pass down wealth.

This section of the talk does not need to involve precise monetary amounts; it is completely appropriate to keep it high-level and focused on the general framework.

You can collaborate with your estate planning lawyer Upper Marlboro to anticipate queries from family members and devise a strategy for dealing with potentially awkward circumstances, keeping in mind that you do not need all of the answers.

Parting shot

Whether the goal is to pass on generational wealth to your children or not, developing a plan based on fundamental principles and correctly communicating it at the appropriate times will assist in guaranteeing that your desires are carried out and your legacy carries on for future generations.

For the best outcome, take your time when creating the plan and always ensure that you let everyone involved know what is going on.

To have an easy time, work with experienced professionals who will not only help you put together the plan, but also advise you on what to include and what to omit in the plan. The professionals will also be your eyes when you are gone.

What You Need to Know About an Estate Plan

Studies show that only one in three Americans have an estate plan. It’s unclear why there is a low intake. Could it be because many people don’t know about it, or they are scared of it as it’s seen as a way to prepare for death?

An estate plan helps shield your family from worry, sadness, and emotional damage. This means that if you want to leave your family at peace, you should work with your estate planning attorney and have an estate plan in place.

If you have been on the fence about getting the plan, here are a few things you should know about it:

An estate plan will cover your decisions in life and death.

Your estate plan specifies what you want to happen to your property once you are gone. Who receives what and when? Do you wish to leave something for charity? Who will be the executor in charge of paying your final bills and dispersing your remaining assets?

You should have all this in your estate plan.

When you are unable to make decisions due to a serious medical condition, an estate plan can help you express your preferences. You delegate decision-making authority to a trusted family member or acquaintance.

You can provide specific instructions, such as whether you want to be an organ donor or decline treatment when on life support with no hope of recovery.

To avoid surprises, you should let everyone in your plan know about their roles once you are gone.

The plan ensures that the government doesn’t make decisions for you

Each state has rules governing what happens when someone dies or becomes incompetent without an estate plan. Without a plan, you lose the opportunity to make your voice heard.

The individual who ultimately makes your healthcare and financial decisions may not be the one you like.

Inheritance laws favor a nuclear family structure, which means that money typically goes first to your spouse and children. If you want to leave something to charity, friends, or family members, you’ll need an estate plan.

With an estate plan, you can specify what you want done once you are gone. You also specify what you want anyone you love, including charities, to receive in your demise.

 A good estate plan speeds up the inheritance.

When you die, the state courts analyze your will and distribute your assets to the specified heirs via a procedure known as probate. If you do not have an estate plan and your family members battle over the inheritance, they may spend everything on legal fees.

Even if probate goes smoothly, it can take many months or even years.

Accounts with beneficiary designations bypass probate and go directly to the named recipients. To protect your loved ones, set up transfer-on-death (TOD) instructions on bank accounts, brokerage accounts, automobile titles, and home titles.

Another alternative is to create a revocable trust. You deposit property into the trust fund but can withdraw it as needed. When you die, the trust transfers the property to the beneficiaries you specify without going through probate.

An estate plan saves taxes for your heirs.

The estate tax is a tax levied on major property transfers upon death. In 2024, the federal exemption is $13.61 million per person, which is not a concern for the majority of people. However, 17 states and the District of Columbia impose some type of estate or inheritance tax with far lower thresholds.

Estate taxes begin at $1 million in Oregon and $2 million in Massachusetts. You can reduce these taxes by planning ahead of time, such as making larger gifts or setting up trust funds.

It is too late once you have passed away, so protect your loved ones from taxes while you are still alive.

A trust fund gives you control even in your demise.

A trust fund is a legal entity that manages property for the benefit of another. You can create a trust fund to govern how your money and property are dispersed after you die.

For example, if you are concerned about your 18-year-old grandson’s ability to manage a six-figure inheritance, you might place the money in a trust fund with a delayed distribution clause, requiring that your grandson get the money until after turning 25 or finishing college.

You get to protect your pets and online accounts.

If you have a cat, dog, or other animal in your family, make sure to mention your wishes for them in your estate plan. Who will take over the pet: a friend or the local humane society? ”

You can even set up a pet trust specifically to help the other person pay for pet food, vet bills, and other needs.

Also, consider whether you have any digital images or files that you want your family to have.

Make sure to mail them while you still can. Consider exchanging passwords for social media accounts if you want a family member to close them after your death.

Work with an experienced attorney when putting together the plan

The cost of drafting your estate plan varies according to its complexity and location. If you feel this is the way to go, you should find an experienced estate planning lawyer Upper Marlboro, and put the relevant documents in place.

There are some online businesses that can prepare your documentation at a fraction of the regular lawyer fees, but you should be ultra-cautious of them.

While they could be an option if you believe your estate plan is straightforward and are comfortable with a DIY approach, they can sometimes overlook certain critical aspects that might be integral to the estate plan.

To be on the safe side, stick with a conventional attorney. They might be a little expensive, but they will be worth it.

For a great experience, take time to get to know the attorney. Visit them in their place of work and find out how they work. As a rule of thumb, work with professionals who have been offering the service for years.