For those with large assets, planning for what will happen to your estate and family after you leave is imperative in order to avoid heavy taxes and protect future generations. But even those with more modest net worth usually have substantial reasons to make sure their estate plans are strong and solid. Legally binding estate plans allow you to determine exactly how your property is to be distributed, reduce the risk of family disharmony, ensure your minor children are taken care of, and avoid unnecessary and lengthy court proceedings. A valid plan is simply the card you leave behind for your family to continue without you. Here are seven steps to make sure you've created a legacy of certainty and stability for those around you.
1. Create a valid will
It is a stark reality, but most of us know that it takes a will. You need a will to make sure that the heirs you choose will receive the property that you specifically want to leave to them. If you do not create a valid will before you die, your property will be distributed according to the laws of the state of the intestate. In the majority of states, that means your children and spouse will share all of your assets and inheritance. If you are single and without children, your assets will automatically be transferred to other relatives by blood, even if you wanted a friend to receive them instead.
2. Create a living trust
Another way to build secure estate plans is to create a living trust. If your property is held in a living trust, your heirs will be able to avoid the costly and time-consuming process in probate court.
3. Establish health care instructions
It is also imperative to consider your personal health care wishes. It is important to have instructions for your care if you are unable to make your own medical decisions. Establishing a healthcare directive, like a living will and medical power of attorney, gives whoever you want the power to make decisions for you.
4. Designate a financial power of attorney
For your finances, consider appointing an enduring power of attorney that will give someone you trust the power to take control of your property and finances in the event of incapacity. This person will take care of all your finances and is usually referred to as an attorney or agent.
5. Appoint a personal guardian for minors
You should also appoint a trusted adult to handle any property or money any of your minor children receive from you. This same person is usually also the personal guardian you designate for your children in your will.
6. Choose beneficiaries
Choosing beneficiaries for your bank accounts is also a good idea if you want these accounts to be automatically payable to beneficiaries upon your death. This will save money by allowing those funds to skip probation.
7. Pay the funeral expenses
Finally, you can save your loved ones extra stress if you formalize your wishes, whether you prefer cremation or burial. You can also set up a prepayment plan or an account with your bank that will cover all funeral costs.
Planning ahead by following these simple steps ensures that you will leave behind a legacy of security and stability rather than chaos and undue stress.