Why Organizing Your Estate Is Important
An organized estate plan is a gift to loved ones. It spares them the stress of not knowing your wishes for care in case of incapacity and outlines how property should be distributed after death. Organized estate plans minimize confusion and conflict among family members.
Review and Inventory Assets and Liabilities
Create an inventory that includes investment and retirement accounts, real estate, personal property and digital assets. For collectibles, it should document where they came from, purchase prices and estimated values. If there are any debts, include all relevant information. Failing to include debts as well as assets can create time and resource-consuming problems for the executor and heirs.
Plan for Incapacity
A comprehensive estate plan protects the living. A Power of Attorney document designates someone to make financial and legal decisions for you in case of incapacity. Similarly, a Healthcare Proxy names someone to make medical decisions and speak with healthcare providers if you are too ill to speak for yourself. Living wills outline wishes for end-of-life care. A HIPAA release is also needed. Without these documents, spouses and children may not be allowed to participate in medical decisions. Unmarried partners must have these documents to be involved with each other’s care.
Last Will and Testament
A last will is used to direct the distribution of assets upon death and nominate an executor to manage the estate. If there are minor children, the last will nominates a guardian if both parents die or become incapacitated. If there is no last will, the court will appoint an administrator to manage the estate and a guardian to raise minor children. The court is not obligated to appoint a family member to raise the children or to consider the family’s wishes when selecting a guardian.
Should You Have a Trust?
Trusts are excellent estate planning tools that serve numerous purposes. Depending on the type of trust, placing assets in a trust may remove them from the taxable estate, minimizing estate taxes. A special needs trust provides for disabled dependents without risking the loss of means-tested benefits. Trusts are also used to avoid disinheriting children from prior marriages. Unlike a last will, which goes through probate and becomes part of the public record, trusts not established under a last will are private in most states. However, last wills and any “testamentary trusts” created under them can be reviewed by family members, creditors and anyone wanting to take advantage of heirs.
Protect Estate Planning Documents
Once your documents are completed, keep them in a safe, easily accessible place. Consider a fireproof safe or a secure digital storage solution. Tell the executor (and any trustee) and family members where they can find your original planning documents. Don’t put them in a safe deposit box at your bank, since these are sealed upon death and won’t be accessible in a timely manner. If you do, however, ensure that your executor (and any trustee) can access the contents whenever necessary.
Keeping Estate Plans Up to Date
As your life changes, so should your estate plan. Reviews should be done after trigger events, like marriage, divorce, births, deaths, or relocation. Changes to tax laws may also make an estate plan review necessary. It’s wise to review estate plans every three to five years.
By following these steps and seeking professional assistance, you can create a comprehensive estate plan that provides peace of mind for you and your family.
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