The topic of estate planning can be difficult for many wrap their heads around. It’s not pleasant thinking about what will happen when you’re gone. But it is absolutely necessary to formulate a plan. Even if you have relatively modest assets, you want control of where they go. If you fail to set up a plan, distribution will be decided for you, and it may not go as you would have hoped.
Writing down your wishes will make it easier for your loved ones to carry them out. You should take these three estate planning tips now.
1. Get Your Critical Documents in Order
Estate planning encompasses more than just your will, though that is a key part of it. Other estate planning documents relate to health care and who has the authority to make decisions for you after you’re gone, which is a particularly key detail you will want to address. Here are the other documents in addition to your will that you should get in order:
Living will: Lays out your end-of-life care preferences, including whether you want life-sustaining measures when you have a terminal condition and if you are an organ donor.
Power of attorney: Gives someone the power to act in your stead in financial and legal matters, including health care power of attorney.
Disposition of remains: Explains your preferences for cremation or burial and who will carry out your choices.
Another relatively recent development is creating a set of instructions for handling your digital assets, such as social media accounts, email and online photos, and banking and brokerage accounts. You might designate an executor or beneficiary to handle these duties. Making a list of accounts, usernames and passwords to give this person will make their job easier.
2. Select Beneficiaries for All Your Accounts
You may not realize how many accounts require a beneficiary. Naming who should receive the money in these accounts will cut down on the red tape, as they won’t have to go through probate. Some accounts you can designate beneficiaries for include:
IRAs and pension plans
Banks and brokerages
Remember, for many accounts, you can name a charitable organization as a beneficiary instead of a person. You’ll want to review these choices every few years, as life changes such as marriages, deaths or new births may require you to update your beneficiary list.
3. Learn About Tax Exemptions
The Internal Revenue Service will not assess taxes on any assets under $11.58 million. For assets above $11.58 million, a 40 percent estate tax will be applied before the money is transferred to the heirs. Certain other estate transfers will not trigger a tax, either, including:
Getting your estate in order can save a lot of headaches down the line, and it doesn’t take long to do once you have committed to it. Need assistance with your estate planning? Contact Jay to discuss your options.