You might be under the impression that estate planning is reserved only for the wealthy, but in reality, it doesn’t matter if you’re affluent or not – you should take estate planning seriously. After all, one of the biggest assets you can leave your family and loved ones is your estate, and no matter how big or small it may be, there is no denying that its value should not go to waste or fall in the wrong hands.
For this and other important reasons, you need to plan for how your assets will be distributed when you pass on, or in the case that you are incapacitated and unable to make decisions regarding your estate or well-being. With that in mind, let’s tackle the five essential estate planning tips you need to know.
Make a detailed asset inventory
First and foremost, it’s important to make a detailed inventory of all your assets in order to start building your estate plan. If you don’t inventory your possessions, you might not be able to account for all the small details in your will, and you might not realize that you have enough belongings to justify making an estate plan in the first place.
This is why making a list of everything you own and want to pass on to others is important. To make this process easier and more efficient, you can break possessions down into tangible and intangible assets:
- Real estate, including homes and land
- Vehicles, which includes marine vehicles
- Collectibles and antiques
- Valuable personal possessions
- Businesses in your name or part ownership
- Stocks and bonds
- Mutual funds
- Retirement plans
- Savings accounts
Create a medical care directive
A medical care directive, also known as a living will, defines how you wish to be cared for should you become unable to make the decisions yourself, and it can also transfer decision-making power to a person of trust in such circumstances. You can have a trusted person make decisions regarding your well-being in case you are left in a state that prohibits you from running your estate or making life decisions.
You can choose to have a living will or combine it with a decision to entrust someone to make medical decisions for you, which is known as an advance health care directive. It’s important to create a medical care directive in order to ensure your will is carried out should you become incapacitated.
Make sure to have a strong will
Of course, the most important step in the estate planning process is the creation of your will. Without a strong will and testament at your side, your assets may fall into the wrong hands and be distributed against your wishes among family members and relatives, which is why getting professional guidance and help in creating your will is paramount.
Legal guidance is essential in making your will air-tight and ensuring that it holds in court should anyone try to contest it. The will needs to list all of your wishes that are to come into effect upon your passing, detailing how your assets will be distributed among family members and beneficiaries. Keep in mind that your will cannot distribute assets that are locked in a trust.
Review your beneficiaries
There are many legal documents that we accrue over the years that require us to sign beneficiaries in the event of our demise. For example, you might have listed your ex-spouse as the sole beneficiary on your life insurance policy and forgot to update it, which would mean that your current spouse would not get the expected payout. This is a nasty surprise, so make sure to review all beneficiaries on all legal documents.
Establish guardianship for minors
Last but not least, you need to consider who will assume care of your underage children in the event that you and your spouse are both unable to resume your parental roles. Make sure to consider your options carefully, and only choose the persons you have complete faith in.
What’s more, you’ll need to decide how the life insurance payouts will be managed in the event of your passing. Typically, it is best for this money to go straight to a trust in their name, one they will be able to access once they have reached adulthood.
Estate planning is an important step towards securing your assets and your legacy and ensuring that it falls into the right hands. Make sure to follow these steps to create a comprehensive estate plan that will ensure your wishes are honored.