Estate Planning Tips to Help Your Plan Succeed

You shouldn’t fall for any of the widespread rumors and false impressions about estate planning. The most popular is that you should put off creating an estate plan until after you have amassed your “fortune” and wait to be married and have children before doing so. Don’t fall for this. At any time, you can put together your estate plan.

When you work with your estate planning attorney, you want your plan to work, right? The cool thing is that there are several things you can do to make this happen. These things include:

Draft your will

Everybody older than eighteen ought to have a will. It serves as a guide for allocating your assets and may be able to stop disputes between your heirs.

Making decisions about who receives what will be more straightforward with your list of assets in the will.  A will can also specify who will care for your pets and appoint a guardian for any minor children. It is also possible to bequeath property to charitable organizations in your will.

Many people think wills are expensive and complex, but this isn’t true.

Depending on the complexity of your assets and location, many attorneys can assist you in creating a will for a small fee.

If you don’t want to pay an attorney, you can use software programs or internet resources to draft your own will.

To make the will binding, sign it with two unrelated witnesses. You also should ensure that you date your will and get a notary.

Lastly, ensure that others know the document’s location so they can retrieve it as needed.

Choose the right executor.

You must designate an executor in your last will to manage the probate of your estate following your passing.

The executor will be the decision-maker who should be capable and accountable.

It’s not always the ideal option to choose your partner. Consider how the emotions around your passing will impact this person’s ability to make decisions.

If there seem to be any problems, think about other suitable candidates. You may designate a close friend or a member of your family that you feel can act objectively in your place.

Besides the executor, you’ll probably need to name individuals to fiduciary positions throughout your estate plan, like trustees or agents. Don’t merely pick a family member or friend because you feel confident in them.

Pause and ask yourself if they possess the skills and background required for the role. As a rule of thumb, you should name the most qualified. If you are unsure about the ones to go with, get the input of a professional.

Know your assets and liabilities.

Your assets and liabilities are probably little known to you, but when you sit down to create your estate plan, you’ll need to know them both inside and out. Make a list of all of your assets and all of your liabilities first.

Remember to include a thorough description, the current value or amount owed, the location, and, if relevant, account passwords for every item on the lists.

Begin by going through your house, inside and out, and listing everything valuable. A few examples are the house itself, TVs, PCs, jewelry, collections, cars, artwork, antiques, lawnmowers, and power tools.

If you come across something you would like to leave to a specific person, you can make notes.

Remember items that are primarily sentimental, such as family photos. Jot down the items you would like to give to a specific charity.

You can snap images to expedite the task and prevent misunderstandings.

As you do this, you might find that the list is far longer than you anticipated. If this happens, don’t worry; keep adding the items.

Include enough information about your financial holdings and entitlements on the list so your heirs can claim them.

This covers any type of insurance policy, including health, disability, homeowners, auto, and long-term care; it also includes bank and brokerage accounts, 401(k) plans, IRAs, and life insurance policies.

Include the account numbers when describing the whereabouts of any physical papers you own. Provide a list of the contact details of the companies that own these intangible assets.

You should also attach a recent statement or other paper document with the essential details (account number, company, and contact details) if it makes it more accessible.

All of your open credit cards and other debts should be listed separately. Auto loans, mortgages, home equity lines of credit (HELOCs), and any other outstanding obligations or credit cards you may have could fall under this category.

Make a note of the account numbers, the addresses of executed contracts, and the phone numbers of the businesses holding the debt.

Add all of your credit cards, noting which ones you use frequently and which are unused and stashed in a drawer.

Attaching a current statement or other document that contains the essential account information may help to simplify this task, so do it if it is feasible.

After making your list, update it regularly when you buy or sell assets.

Remember to include incapacity planning.

As circumstances demand, you will probably add many elements to your estate plan throughout your lifetime. However, one element that ought to be present from the start is incapacity planning.

When most people think about incapacity, they usually picture an elderly person with Alzheimer’s disease or a comparable illness. Though diseases like Alzheimer’s can undoubtedly lead to disability, the truth is that anyone can become incapacitated at any time.

For example, you can be involved in an accident.

Due to this, you should always have a section dedicated to what will happen if you get incapacitated.

Thankfully, you don’t need to do much. You only need to consult your estate planning lawyer Largo and make the necessary plans.

Ways to Avoid a Probate Court

You need an estate plan whether you have $20,000 or $2 million in the bank.

Many people believe estate planning or having a will is only for the wealthy, but this isn’t the case.

Even people with small resources should strive to ensure that their property and assets pass to their chosen successors rather than the government’s.

A will is also necessary for families with minor children since it can determine who gets custody if both parents die simultaneously.

When you don’t have an estate plan, it means that your heirs will have to go to a probate court and it’s the court that will decide how the property will be distributed. You don’t want this to happen, do you?

The best way to ensure that your heirs end up in court you need to do a number of things that include:

Work with experienced attorneys

Estate laws differ from state to state. As a result, it is prudent to obtain the counsel of a local, knowledgeable estate planning lawyer. This is especially vital if you have a substantial estate or a complicated financial situation.

Besides an attorney, you also should get an accountant with enough knowledge in taxation.

Working with the proper professionals not only guarantees that all of your paperwork will be accurately produced, but they may also help you identify issues that might be a problem in the future. 

Estates with many illiquid assets, for example, have the potential to cause problems for heirs.

Estates containing family farms, businesses, or other property that cannot be easily divided fall into this category. While one successor may prefer to maintain the asset, others may prefer to cash out their share.

An expert estate attorney will help analyze opportunities for injecting capital into an otherwise illiquid estate, thus avoiding conflicts.

Draw up a will.

Writing a will is the most fundamental estate planning strategy. This document specifies how your assets will be split after your death and can be used to specify whom you wish to have custody of any minor children.

The challenge with this is half the adults don’t have a will. That could be because people don’t want to think about dying or are unsure how to share their possessions.

If you die, your estate without  a will, your property will be divided in probate court. This means that someone else will decide who receives your money.

Thankfully, drawing a will will prevent this from happening. While doing this will keep the court from determining the trajectory of your estate, remember that even estates with wills must go through the legal system.

This is meant to review and approve the will’s validity.

Set up a trust.

If you have a large inheritance or are concerned that your heirs will mismanage it, you can set up a trust and choose a trustee to transfer your riches. This method also prevents your assets from becoming entangled in litigation.

You completely avoid the need to probate a will when you have a trust in place. 

Besides giving you peace of mind that your property won’t be damaged, a trust gives you plenty of tax advantages. When money is placed in an irrevocable trust, you no longer own the assets. They are the property of the trust.

Due to this, the funds are exempt from estate taxes. While a trustee ultimately controls the money, you can choose how it will be used, and money can be distributed from a trust while you are still living.

Someone you know directly, such as a friend or family member, can serve as trustee. You can hire corporate trustees if you don’t know anyone prepared to take on this responsibility.

Because trusts are complicated, you should work with an experienced estate attorney to understand how to form one that matches your needs.

Check with your beneficiaries.

Having beneficiaries identified for each of your assets is one approach to avoid probate court. Some accounts, such as retirement savings and life insurance policies, allow you to choose beneficiaries via their online account.

Some states have beneficiary deeds, which allow you to transfer property to someone else upon death easily. You can set up other accounts with transfer-on-death clauses, and this is the cheapest and easiest option to distribute assets to your heirs.

Because a beneficiary or TOD designation takes precedence over anything specified in a will, examining beneficiary information following each major life change, such as the birth of children, marriage, or divorce, is good.

Convert traditional retirement accounts into Roth accounts

You may unintentionally leave your heirs with a large tax burden if you have normal 401(k) or IRA accounts. This is because payouts from all traditional retirement accounts are subject to normal income tax.

Nonspousal heirs, such as children, had the option in the past to spread those payouts across their lifetime, effectively lowering the overall taxes due.

Heirs who are not spouses must now remove all funds from an account within 10 years. If the account balance is considerable, significant distributions may be required, which may be taxed at a higher rate.

If you want to transmit money to heirs tax-free, you can do so by converting standard accounts to Roth accounts because Roth structures are nice for heirs.

The converted amount is subject to standard income taxes, but withdrawals are tax-free if made by you or your heirs. Furthermore, with tax rates reaching historic lows, paying taxes now rather than later may be preferable.

Gift your money wisely while you are alive.

If you give your money away while still living, you might not have to worry about estate taxes and probate courts. 

Even if you don’t need the tax advantages, giving gifts while still living allows you to observe how the property changes the lives of your loved ones.

When gifting, be cautious about transferring assets that appreciate, such as stocks or a home, because they receive a step-up in basis when included in an estate.

As a result, the taxable amount of an asset is changed following the owner’s death, therefore it may be advantageous to transfer some assets after death rather than before. For peace of mind you are doing the right thing, consult with a tax professional.

Charitable contributions are another strategy to lower the value of your estate. Instead of making a one-time donation, consider establishing a donor-advised fund.

This option allows you to receive an immediate tax deduction for money invested in the fund and make charitable contributions over time. You can appoint a child or grandchild as a successor in charge of the money.

When creating a fund, ensure the documents are in order. This requires you to draft the documents with your estate planning attorney Largo.