Estate planning isn't just for the rich. Everyone has to make decisions on financial matters to make sure wishes are granted after death. Explore your options to determine which items match your needs, wants, and family situation. By solving these problems as early as possible, you can focus on enjoying life to the fullest.
Power of attorney for health
Select someone you trust to represent your health interests if you become ill or incapacitated. Known as the Health Power of Attorney, this designation designates a person to act on your behalf to make health related decisions. Also consider a living will that tells medical staff what to do if you need life support measures.
Financial power of attorney
Appoint a trusted family member or friend to act as your financial proxy. As a financial power of attorney, this person manages your financial affairs if you cannot manage them yourself. Ideally, the person you appoint to this role will have a solid understanding of investments and financial matters to ensure prudent decisions.
Evaluate your assets
You need to have an idea of the assets you own before embarking on estate planning. Take inventory of your investments, insurance policies, savings, and real estate. Once you have made this inventory, consider the people you want to become your heirs and the possible distribution of your wealth among those people.
Make a will
After evaluating your assets and their possible dispersion, you have made the preparations for your will. A will designates the distribution of property between the heirs. You can describe charitable giving in this document to ensure that specific charities receive donation funds after your death. A will can also designate guardians for minor children. Dying without a will is called "dying intestate," which means your survivors must figure out how to distribute your assets without going along with your wishes.
A trust is a legal document that places conditions on the distribution of assets after your death. Trusts can be effective in reducing taxes because the trust acts as a protection against taxes. Trusts also speed up the process of distributing assets because a trustee manages the process instead of a lengthy legal process in a probate court.
Federal Inheritance Tax Exemption
Beginning in 2013, the federal government instituted a permanent exemption for estates under $ 5.25 million with an inflation index. Estates exceeding this amount will be subject to a tax of up to 40 percent.
Communicate with your heirs
Consider speaking to your heirs before proceeding with estate planning to communicate the details. Explain your desires and intentions with your family and friends to make sure they understand your plans. It is common for legacy situations to be emotional for families. Clear communication before making decisions and before your death can eliminate problems and conflicts after your death.
By considering all the options and details of estate planning, you can ensure that your last wishes are fulfilled and that your family's needs are met.