One thing that most of us have in common is that we each have an estate – our home, car, bank accounts, insurance policies, possessions, etc. No matter the size of our estates, they still require proper planning. Estate planning helps to ensure that your assets are handled your preferred way in the event of your passing, but also that taxes are potentially minimized for those receiving your estate.
Guardianship Paperwork
When children are involved, estate planning takes on a whole new meaning. Understandably, because of the daunting reality after deaths of both parents, guardianship is a very tough decision. A few things to keep in mind when choosing a guardian are whether that person (or persons) have the funds to care for your children and enough time to dedicate to them. Once your guardian(s) are chosen, be sure to have the paperwork in place. Guardianship is worth revisiting every few years or more frequently in the event of significant life changes.
Revocable Living Trust
If you’re not familiar with probate, it is the process of authenticating the deceased’s last will and testament. It is not only an expensive procedure but also a time consuming and incredibly frustrating one as well. Creating a revocable living trust, however, prevents the estate from having to go through probate. Simply put, a revocable living trust holds ownership of a person’s assets and is inclusive of lifetime, incapacitation and death. A trust provides much more control to the future of the assets than does a will.
Special Needs Trust
For those with a disabled family member, it is important to know that setting up a special needs trust is necessary. Why this specialized trust is crucial is because it allows your disabled beneficiary to use what is held in that trust without jeopardizing their state or federal government benefits. Alternatively, leaving money to that person in a regular will could possibly disqualify them from receiving special needs benefits.
Last Will and Testament
Even when a trust has been set up, you still need to rake through will items such as jewelry, art and personal assets. Most trusts manage specific assets whereas a will manages the entire sum of your estate and is part of your trust. Your will should be reviewed every few years or more frequently as certain circumstances are met, such as divorce.
Power of Attorney (Medical and Financial)
The Power of Attorney (POA) appoints someone to act for you in regards to financial, legal and medical matters if you are unable to do so yourself. Generally speaking, the POA is responsible for all financial matters such as settling business transactions and purchasing life insurance. A health care POA, however, has the authority to make medical decisions on your behalf. You can appoint different agents to handle different aspects of your estate or we recommend a backup should only one person be appointed to handle all affairs. Keep in mind that securing a POA ensures your wishes are followed so be certain that the chosen agent(s) knows what to do and is capable of making these decisions.
Living Will
In the event that you are unable to express consent, a living will dictates your wishes regarding medical treatment. A living will is important for many reasons including determining end of life. Consequently it should be high on your priority list when planning your estate. We suggest that your health care agent be a good friend rather than a family member, as it will likely be an emotional time.
Irrevocable Trust
Under current law, an irrevocable trust is only needed for an estate that is equal to or upwards of $11 million per individual (subject to change). Estate and tax considerations are the prominent reasons for setting up an irrevocable trust. As the name implies, you cannot amend or revoke this type of trust once signed. Often this is used to purchase life insurance to pay estate taxes with pennies on the dollar. By giving assets to a beneficiary through this trust your taxable estate is thereby decreased.
Charitable Remainder Trust
A charitable remainder trust is a type of tax-exempt irrevocable trust where you can generate income, save on taxes and benefit charities. You can donate specific assets, such as real estate, to the beneficiary of the trust for a set period of time, after which the remainder of the donated assets is transferred to the charity or charities of your choice. Consult with your accountant for specific details as you can sometimes receive tax-free income during your lifetime.
The best time to plan your estate is now and the biggest benefit is peace of mind. Planning your estate helps to provide certainty that your family and loved ones are protected and knowledge that you are prepared for any unforeseen circumstances. Your financial advisors are here to help.
