Estate Planning Best Practices

Estate planning is the process of organizing your affairs so that your loved ones can be cared for if you die or become incapacitated. Due to the importance of estate planning, you must do the right things to make the estate planning process easy. Besides hiring a reputable estate planning attorney, some of the other things you should do include:

Have a list of your valuables

First, go through your entire home, inside and out, and compile a list of all valuable stuff. Examples include the house, televisions and computers, jewelry, collectibles, automobiles, art and antiques, lawn equipment, and power tools.

As you explore, make notes if you come across something you want to leave for a specific person. Don’t forget about sentimental belongings like family photos.

You also should list items you wish to contribute to a favorite charity.

To ensure you can remember the items, consider taking photos.

You will even be better off if you can ask someone to help you.

Put together your debts.

You should make a separate list of all your open credit cards and other obligations. This may include vehicle loans, mortgages, home equity lines of credit (HELOCs), and any other debts or open lines of credit you have.

Take note of the account numbers, locations of signed agreements, and contact information for the companies that hold the debt.

You should include all your credit cards, noting which ones you use frequently and which are sitting in a drawer unused.

You should note that you can simplify the process by adding a current statement or document with the necessary account information.

Have a list of all your memberships.

You should list all the groups you belong to, such as AARP, The American Legion, a veteran’s association, a professional certification association, or a college alumni club.

This is because, in some situations, these organizations may provide their members with free accidental life insurance benefits, which their beneficiaries may be qualified to receive.

Include any other charities that you support. You can tell your beneficiaries about the charitable organizations or causes that are important to you and to which you would wish donations made in your memory.

You also should note any recurring gifts you make to a nonprofit organization so that your heirs can cancel or continue them.

Document your nonphysical assets.

Add your financial holdings and entitlements to the list, ensuring they are explicit enough for your heirs to claim.

This includes bank and brokerage accounts, 401(k) plans, IRAs, life insurance policies, and other policies like long-term care, auto, disability, and health insurance.

You should include account numbers and the location of any physical papers you possess. List the contact details for the companies that own these non-physical items.

If it is easier, attach a recent statement or similar paper document with crucial information such as the account number, company, and contact information.

Review your retirement accounts.

Accounts and insurance with chosen beneficiaries will be transferred directly to those people or entities following your death.

Remember that it makes no difference how you direct the distribution of these accounts or policies in your will or trust. If there is a dispute, the beneficiary names for the retirement account will take precedence.

Check your online account, or contact your employer’s customer support team or plan administrator, for a current list of your beneficiary selections for all accounts.

You should examine them to ensure they are current. This is especially significant if you are divorced and remarried.

Find a responsible estate administrator.

When you die, your estate administrator or executor will administer your will. You must hire someone accountable and capable of making decisions.

Your spouse is not necessarily the greatest option, as they might be extremely affected by your demise.

You should consider how the emotions surrounding your death will influence this person’s decision-making skills.

If you anticipate any problems, consider other competent candidates. You could name a close friend or family member whom you trust to act impartially on your behalf.

Update your insurance

Life insurance and annuities, like retirement funds, pass directly to your specified beneficiaries. If you have life insurance, ensure your beneficiaries are up-to-date and accurately named.

In terms of timing, this could be the most crucial aspect of your estate plan. Your heirs will require instant access to some of your assets to meet their basic requirements and organize for your burial.

Draft your will

Everyone above the age of eighteen should have a will. This is because it is the rulebook for distributing your possessions, which may avert havoc among your heirs.

It’s best done as soon as you’ve completed all of the above-mentioned documentation. Your list of assets will make it easy to determine who receives what.

A will might appoint a guardian for minor children and specify who will care for your pets. You can also give assets to charitable organizations in your will.

Wills are generally affordable estate-planning documents to create. Your wills and trust attorney Largo will assist you in making a will for a small fee, depending on the complexity of your assets and the geographic region.

You can also create your own will using online tools or software.

When you make a will, sign and date it in front of two unrelated witnesses, who should also sign it, you should then get it notarized.

Finally, ensure that others are aware of the document’s location so that they can access it when necessary.

Simplify your finances

If you’ve changed jobs in the past, you may still have multiple 401(k) retirement plans or IRA accounts with previous companies. If this is the case, you should consider combining these accounts into a single individual IRA.

Consolidating accounts provides better investment options, reduced fees, a more comprehensive range of assets, less paperwork, and easier management for you and your heirs.

Reasons to Update Your Will

Have you already completed your estate planning? Perhaps you’ve completed your last will and Trust? Great! You are already ahead of the pack!

But when did you do this? Do you know when you should examine your Estate Planning paperwork and, if necessary, make adjustments or revisions to your Will?

Its recommended that you find a wills and trust attorney every four or five years and update your will. It’s also highly recommended that you amend your will after each big life event that impacts the course of your life, whether for the better or worse.

Some of the reasons to revise your will include:

Change in marital status

If you were married, you may have named your spouse as a beneficiary in your will. You should revise your will in the event of a divorce, wedding, or death. It is vital to remember that stepchildren are not legally entitled to your property, so keep this in mind when updating your documentation.

You are having health challenges.

Health changes can have an impact on your will. If you have been diagnosed with a degenerative condition or a life-threatening sickness, it is in your best interests to use this time to adjust the Will to your wishes.

Furthermore, any additions you had planned prior to your diagnosis should be implemented as quickly as possible.

Changes in your finances

This is another significant event that influences your will. A rise in wealth can push you into a higher tax category and result in greater taxes. In addition, you may want to raise the amount of money you leave for your beneficiaries.

In contrast, your financial circumstances may worsen, and you may be unable to contribute the amount you expected. At this stage, you must make changes to your will.

You change your mind about a beneficiary.

It is reasonable to change your mind and thoughts regarding the persons or organizations named as beneficiaries in your will, possibly owing to disagreements after you signed your will or for other causes, good or negative.

Remember, it is your money, and you have the right to change your mind about who receives the cash after your death.

If you feel that the beneficiary you mentioned in your will isn’t the right one, you should consider updating your will and having a new beneficiary.

You want to update estate laws.

Laws affecting estate taxes can and do change over time. When this happens, you should amend your will to reflect any relevant changes when they occur. Consult your wills lawyer to stay up to date on estate rules and how they affect you.

Your beneficiary or executor has died.

If your named executor or beneficiary dies, you must update the information to name a new executor or a different recipient for the asset or property.

Even if your will includes provisions for such occurrences, you may want to consider amending it.

To change the executor, you need to draft an addendum, which is a written amendment that modifies your Will. Make sure you understand your state’s laws so your codicil is valid. The number of witnesses and whether or not a notary is required varies by state.

How much does it cost to amend a will?

The cost of amending a Will varies depending on several things. Did you intend to hire a lawyer, or do you prefer to handle it yourself? How complex are the changes? Which state do you live in?

You should address these questions to accurately estimate the expense of changing a will.

Lawyers can charge a wide range of fees based on your location and other factors. Of course, it is possible to make modifications entirely on your own, but many people are hesitant to do so, fearing that they will not have done everything necessary to ensure the validity of their new will.

Can you make handwritten changes to a will?

Technically, you can make handwritten amendments to your Will. However, different states have different regulations governing how and when this is permitted, so you should proceed with caution.

Family members can easily challenge handwritten modifications in Wills, so if you want your Will and any amendments to be as strong as possible, avoid making handwritten alterations.

Can you make your will null and void?

Yes, you can do it, and there are a number of ways to go about it. Making a new Will or adding a codicil renders your prior one null and void. Of course, you could take drastic measures such as destroying all original copies or selling, giving away, or otherwise disposing of assets listed in the Will.

What next after updating your will?

Even after you’ve modified your will, you must ensure that you have the necessary signatures and witnesses to comply with state law.

You may need to get your Will notarized, and you should keep it somewhere safe. Make sure someone you trust knows where your will and other estate planning paperwork are.

Parting shot

It is a good idea to examine all of your Estate Planning documents periodically. Knowing what you need to do to update your Will (and when to do it) is critical.

Whether you’ve only had one major life event or you haven’t revisited your Will in years and a lot has happened, keeping your Will up to date is an important component of protecting your family when you die.

You should take your time when preparing and updating the will and ensure that you capture all the relevant information.

As mentioned, you should make it a habit to update your Will every 4-5 years or when there is a major life event.

To have an easy time, work with an experienced probate attorney Largo who will not only help you put the will together but also let you know when things aren’t going as planned.

Understanding Living Trusts

A living trust is a trust that you establish and fund while you are still alive.

The basic goals of a living trust are:

  • To manage and distribute assets and trust property to named beneficiaries without the probate court’s involvement.
  • To ensure that assets are transferred smoothly to named beneficiaries in the case of the grantor’s incapacity.
  • Assets are used to provide financial stability to family members.

You can establish a living trust as long as you are mentally and financially competent. There is no minimum age for establishing a living trust, though it is more customary for older people to establish one.

To establish a living trust, you must have assets to transfer into the trust and a clear knowledge of your trust’s aims.

When considering a living trust, it is critical to speak with a wills and trust attorney or a financial advisor, as they can help you assess whether a living trust is right for your case and provide information on the legal and financial concerns involved in establishing one. 

Why should you have a living trust?

People establish living trusts for a variety of reasons. Some of the reasons you should consider getting the trust include: 

To avoid probate

Probate is the legal process that follows the death of a person in which the court oversees the distribution of the deceased person’s assets.

When you have a trust, the assets flow immediately to the beneficiaries listed in the trust document without the requirement for probate court.

This not only saves you time, but also money. 

To help with asset management

A living trust allows you, the grantor, to retain control over your assets administration and distribution during your lifetime.

You can serve as the initial trustee, deciding how the funds will be invested and managed. In the case of revocable living trusts, you can change the trust’s provisions at any moment.

However, in the case of irrevocable living trusts, you must obtain the beneficiaries’ agreement to change the trust provisions.

To ensure privacy

Individuals with large assets or those who prefer to keep their financial matters secret can use trusts and outlets to keep their information confidential rather than on the public record because it provides more privacy than a will.

To avoid contest

A well-drafted living trust specifying your preferences for asset distribution can help avoid contests over your assets.

This can help lessen the risk of disagreements among specified beneficiaries while ensuring that your desires are followed even in your absence. 

Helps in planning for estate taxes

You can use a living trust for estate tax planning because you can establish certain trusts to reduce federal estate tax liabilities.

This can help you protect your assets’ value while reducing the overall burden of estate taxes.

Helps with the transfer of assets in the event of incapacity

If you are incapacitated, you can appoint a trustee to help manage the trust and make decisions about the assets on your behalf.

This can guarantee that assets are transferred smoothly to the chosen beneficiaries and prevent needing a court-appointed guardian or conservator.

How to establish a living trust

As mentioned, putting together a living trust can help ensure your assets are managed and dispersed in accordance with your preferences. The following are the stages required in establishing a living trust:

Decide on the type of trust you want

The first stage in forming a living trust is deciding on the type of trust you will establish. 

As mentioned above, you can amend a revocable trust or revoke it at any time, whereas an irrevocable trust cannot be changed or canceled without the approval of the beneficiaries. 

Before making a decision, weighing the advantages and disadvantages of each type of trust is critical.

Create a trust document.

The next stage is to draft a trust document once you’ve decided on the type of trust you wish to establish. This document defines the trust’s terms, which include:

  • The trustee selection.
  • Beneficiaries.
  • Any limits or restrictions on how the trust’s assets may be used.

Have the trust document notarized or signed by an attorney

For a trust document to be legally binding, you should have it notarized or signed by a lawyer. This guarantees that the document satisfies all legal standards and is legally enforceable.

Set up a trust bank account.

Setting up a separate bank account for the trust is recommended to make managing the trust’s assets easier. 

This also ensures that the trust assets are not mixed with personal or corporate assets.

Transfer all the assets into the trust.

The final stage in establishing a living trust is transferring ownership of all the trust’s assets to the trust.

Real estate, bank accounts, stocks, and any other assets you wish to put in the trust are all acceptable. 

Transferring ownership of these assets ensures that the trust is managed and distributed in accordance with the requirements of the trust document.

To ensure the trust is properly established and managed, speaking with an expert estate planning attorney is critical.

Difference between a will and trust

Many confuse trusts with wills, but the two are different. 

A will describes how an individual’s possessions will be allocated after death and can be used to designate a guardian for young children. A will is only effective after the person’s death.

On the other hand, a trust is a legal structure in which a trustee keeps and administers assets for the benefit of the trust’s beneficiaries.

A living trust transfers ownership of assets to the trust while the grantor is still alive, and the trust conditions govern how the assets are divided after the grantor’s death.

Parting shot

This is everything you need to know about a trust. As you have seen, many advantages come with having one. There are also many types of trusts that you can get. 

Regardless of the reasons and types of trusts that you get, ensure that you work with an experienced probate attorney  PG County to help you put together a solid document.