According to data from the National Association of Estate Planners & Councils, over 120 million Americans have failed to update plans to protect their families in the event of accident, illness, or death .
Starting the estate planning process can be the most important gift you give to your family so that your loved ones are not left in uncertainty and conflict. These five steps can help you start the process and clarify your last wishes to your family.
1. Create a will
If you die without a will, the court will decide what to do with property, debts, and even your children. This is called intestate death, and it leaves the process of distribution to the law of the state where you reside. To write a valid will, just focus on stating exactly who you choose to inherit your property, and also write who you want as a guardian for your children in case something happens to you. Other parent. If good planning is not completed, your family will be stuck in probation court, which is time consuming and expensive.
2. Consider a trust
If you want to bypass the probate process altogether, consider creating a revocable trust. If you hold your assets in this way, you will essentially be transferring ownership of your property to a trust that will include exact details of the distribution upon your death. Since the information is contained in one document, you can skip the approval completely.
3. Set up life insurance
Life insurance is a good idea, especially if you have young children, own a home, or likely owe a large amount of estate tax after your death. You will need to make sure your family is covered enough to cover all of their expenses when you are no longer around to help. Consider purchasing term life insurance, which can be an affordable option as you pay a fixed premium for the duration of the term.
4. Gather end of life documents
Beyond wills, trusts, and life insurance, essential estate planning should also involve meeting three important end-of-life documents. To help your loved ones make your wishes come true when you can't, you need to make sure they have these three documents:
– A power of attorney that allows your appointed representative to manage your legal affairs and your financial situation.
– A form that allows the disclosure of information from your doctors to the chosen representatives.
– An advance directive form in which a person is appointed to make medical decisions when you are incapacitated and a living will to detail exactly what medical treatment you desire at the end of your life.
5. Learn About Estate Taxes
Even though the majority of estates won't owe tax, if you have a taxable estate worth over $ 5.43 million, it's important to understand how much you'll owe and how to strategically minimize that amount. . For example, if you leave all the assets to your spouse, this distribution will be tax exempt.
Despite the critical nature of the estate planning process, it can be difficult to start the conversation. If you prioritize these simple steps, you will have the peace of mind of knowing that you have done all you can to protect your family after your death.