Estate planning is a major step to make sure your assets go to the right people when you are gone. It allows you to decide who will receive your property, who will manage your finances, and who will take care of any minor children.
While the process may seem overwhelming at first, taking the time to plan your estate gives you peace of mind knowing that your family will be taken care of and your wishes will be respected.
It also helps avoid unnecessary legal issues and complications that can arise if there is no clear plan in place. Estate planning can protect your loved ones from potential confusion, delays, or conflicts over your assets.
Here are some important points to consider when starting your estate planning journey to ensure your family’s future is secure and your assets are properly managed.
Create a Will
A will is the foundation part of your estate plan. It explains how you want your assets to be shared and who will take care of any minor children. Without a valid will, the state will decide how to divide your estate based on its own laws, which may not align with your personal wishes. This could lead to outcomes that you wouldn’t have chosen for your family or loved ones.
When creating a will, one of the most important steps is to appoint a trustworthy executor. The executor follows your wishes, pays all debts, and ensures the smooth settlement of your estate. Creating a clear, legally binding will provides peace of mind. It ensures your affairs are handled as you intended.
Appoint a Power of Attorney
Choosing a power of attorney (POA) means you are giving someone the legal right to make decisions for you if you are unable to. There are two primary types: a financial POA and a medical POA.
A financial POA is responsible for managing your financial matters, such as handling your bank accounts, paying bills, and making other important financial decisions. A medical POA, on the other hand, makes healthcare decisions for you if you’re unable to communicate or make those decisions on your own.
It’s important to have both types in place to manage your affairs according to your wishes. This ensures your personal and financial matters are handled, even when you’re unable to do so. Having a POA in place gives you peace of mind. Trusted individuals will be in charge of your affairs, protecting your wishes.
Consider a Trust
A trust can give you more control over how your assets are distributed after your passing. It can help your estate avoid probate, which can be slow and expensive process.
Trusts let you decide exactly for when and how your beneficiaries can get their inheritance. There are different types of trusts, such as living trusts and testamentary trusts and a professional can help you decide what is best for your situation.
A living trust allows you to transfer assets while you’re still alive, making it easier to manage and distribute your property. A testamentary trust, on the other hand, is created through your will and only takes effect after your death.
Choosing the right type of trust depends on your individual needs. It also depends on the level of control you want over how your assets are handled.
Prepare for Taxes
Estate taxes can take a significant portion of your assets if you don’t have a solid plan in place.
While many estates might not exceed the threshold for estate taxes, it’s important to consider other taxes. These taxes could still affect your beneficiaries.
This includes capital gains tax, which is applied to the increase in value of assets. Inheritance tax may apply, depending on your estate’s value and the state you live in.
Without careful planning, these taxes could reduce what you leave behind for your loved ones. Consulting with a tax advisor can help you structure your estate in a way that minimise taxes.
Update Your Plan Regularly
Life brings many changes, such as getting married, having kids, going through a divorce, or experiencing significant financial shifts. And these changes can have a big impact on your estate plan. Regularly review and update your will, power of attorney, and trusts to ensure they reflect your current situation and wishes.
Estate planning may seem overwhelming. However, it plays a key role in protecting your family and ensuring your wishes are followed. Creating a clear estate plan, including a will, powers of attorney, and possibly a trust, ensures proper asset distribution.
Taking the time to create and regularly update your estate plan minimizes the risk of stress, confusion, and complications. It ensures that your wishes are honored and your legacy is protected.
At Allied Business Accountants, we work alongside you and your solicitor to create a comprehensive estate plan that maximizes financial benefits for your family and beneficiaries.