Estate Planning: How You Should Go About It

Most elderly persons agree that estate planning is critical. However, over half of Americans aged 55 and up do not have a will, and even fewer have specific powers of attorney, a living will, or health care directives.

These legal documents assist your representatives in providing the end-of-life wishes you seek. Estate planning also alleviates the load on your loved ones and decreases the likelihood of family strife following your death.

Every senior should have an estate plan, regardless of how much they own. Some people think they should only get a plan if they are rich, but this isn’t the case.

You should get an estate planning attorney and proceed with drafting the plan regardless of the amount of assets you have.

Your estate includes your home, real properties, vehicles, businesses, bank accounts, life insurance, personal belongings, and any debts you may have. The objectives of your estate plan include:

  • Establishing who will inherit your assets after your death
  • Establishing a durable power of attorney.
  • Choosing a trustworthy agent to make health care choices on your behalf if you become unable to handle your affairs due to illness or accident.
  • Creating a Will and Trust
  • Reducing estate taxes
  • Appointing your estate’s executor or representative
  • Providing peace of mind for you and your loved ones

You need to create a will

A testamentary will is a legal document that transfers your estate to the individuals or charities you name after your death. Your will also allow you to name an executor or personal representative.

This person will ensure that your preferences are carried out. Many older adults select their most responsible adult child for this position.

Inform the person you’ve chosen to manage their expectations, as well as your family, about what to expect in your will. This allows you to answer any queries they may have and avoid family confrontations after you leave.

When you are putting together your will, you need: your executor, beneficiaries, critical assets, and debts (e.g. mortgages, car loans, credit cards).

Be warned that if you have considerable assets in probate court, the process might cost up to 10% of your estate’s value. This can stress your executor’s position and extend the time your family members take to get their inheritance.

You may want to create a trust; this can be done by consulting with an estate planning expert. Building trust can save taxes, limit wealth distribution, and avoid probate.

These trusts are often either revocable or irrevocable living trusts, special needs trusts, or spendthrift trusts. Your attorney can help you choose the trust that best suits your interests.

Drafting your living will

A living will define your end-of-life treatment options and will be used while you are still alive but unable to express health care preferences.

Similarly, a healthcare power of attorney’s decision-making will only become effective if you cannot communicate your intentions.

The person you name as your durable health care power of attorney is usually a caregiver or family member you trust.

When you are creating a living will, consider:

  • Medications you are willing or hesitant to have given to you
  • Permission to use a feeding tube if you are unable to eat.
  • Permission to use life support and its duration, as well as a willingness to accept palliative treatment toward the end of life.
  • Having a do-not-resuscitate order (DNR)
  • Your decision to be an organ donor

If you have both documents, the living will precede the healthcare proxy.

Many older persons prefer not to have a living will. Instead, individuals choose to have their healthcare proxy make medical decisions on their behalf if they cannot communicate their desires for treatment and life-saving procedures.

Whatever you decide, you must notify your loved ones about your healthcare preferences.

Think about the power of attorney.

A financial power of attorney, like a health care power of attorney, takes effect when you cannot make financial choices.

The person you nominate will handle your finances on your behalf.

To save unnecessary burden, consider selecting someone other than your health care power of attorney. However, it is legally permissible to name the same individual.

Your financial power of attorney should be highly trustworthy and financially sound. When choosing someone in your life to serve this function, you may want to consider someone who not only lives nearby but is also eager and capable of helping.

The person must be financially responsible, trustworthy, and willing to act in your best interests. Finally, this person should be proactive and helpful in safeguarding your finances.

While these forms outline the fundamentals of an estate plan, your circumstance may necessitate significantly more detail and nuanced skill than a law attorney can provide if they do not also practice estate planning. Begin with a checklist, which includes:

  • List of your assets and obligations.
  • Gather relevant supporting documentation.
  • Select candidates for the executor (personal representative) and power of attorney.
  • Draft an outline of the estate planning documents described above.
  • Talk to your family about your aims and wishes.

Work with an estate planning attorney.

When you’ve completed these activities, a skilled estate planning or elder law attorney can examine your efforts and implement your strategy.

You will save time and money by being organized and having a basic understanding of the estate planning process before consulting with an attorney.

This calls for you to dedicate some time to research and gather as much information as possible about estate planning.

When you’ve completed all your estate planning documents, you’ll have peace of mind knowing you have a solid plan to protect yourself and your loved ones.

When finding an estate planning lawyer Largo, don’t hire the first one you come across. Instead, take time to research and find a reputable professional experienced in handling estate planning matters.

The last thing you want is to hire a contractor who causes more harm than good.

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.