It is a subject no one is comfortable talking about and one that many people avoid: individual mortality. Despite the negative connotations, estate planning is a necessary financial consideration that anyone with loved ones should address, regardless of age. It is misnomer that estate planning is just for older, very wealthy people. In fact, I recommend estate planning as part of your overall financial planning, which can start as early as possible.
Why estate planning? Because estate planning can offer peace of mind to you and your loved ones. Knowing that surviving family members and friends will not have to sort out details on their own may seem trivial, however having to unwind a loved one’s estate and decipher their wishes only magnifies the stress during an already difficult time.
Preparing for end-of-life is full of decisions that are hard to think about. This process is further complicated by the inertia of tax codes, regulations, and legal concerns that apply only to estate planning and can be a source of uncertainty, anxiety, and worry over every decision and detail. Relying on the competent and compassionate advice of an estate professional can alleviate worry and anxieties and ensure that your final wishes are executed without difficulties.
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Here are four things everyone needs to know about estate planning.
You Better Name Your Beneficiaries
There is a difference between named beneficiaries and an estate. In terms of estate planning, the three key areas to pay attention to include:
· Knowing who your beneficiaries are
· How assets are titled
· Whether assets can transfer without a will
While these issues may seem simple, they are often the most overlooked estate planning considerations among people with bank accounts, money markets, real estate, life insurance, and other valuable investments and assets which all can have listed beneficiaries.
Additionally, most retirement accounts can transfer without (or outside of) a will. Taking the time to review documents, update beneficiary names and contact information, and assign assets to the correct transfer proceeding ensures that they pass correctly and expeditiously.
It’s also critical to know that a will designation does not override beneficiary designations. For example if you IRA had your spouse listed as a beneficiary, but your will had your children, the assets would move to your spouse despite what was written in the will.
An Estate Includes ALL Assets
Another misconception of estate planning is that you need to be rich or own a large amount of property to have an estate plan. Every personal and financial asset is an integral piece in legacy planning.
As modern financial markets change, even online assets like your social media accounts should be considered as part of effective estate planning. Digital assets, such as online savings accounts, may be well-hidden and difficult to access through varied layers of complex security if no one else has your login information. Providing loves ones with specific rights and access to online accounts is a serious and necessary consideration for estate planning in the digital era.
A Will Isn’t Enough and May Not Be Your Best Option
Estate planning begins with a will or living trust, but having one doesn’t complete your estate plan. A will itself will provide your instructions, but it won’t avoid probate. Jointly-owned property and assets that let you name beneficiaries can often allow your loved ones to avoid probate, which is why it is so important to name beneficiaries on your assets.
An irrevocable living trust is usually a good option for many families, because it helps your family avoid probate and brings all your assets (even the ones with designated beneficiaries) together in one plan. Another huge benefit of the irrevocable living trust is that it is valid in every state and is easy for you to update. You can designate a trustee to manage your estate until beneficiaries reach the age you determined they would inherit your assets.
Estate Planning is Relevant While You’re Still Alive
Estate planning isn’t just for divvying up assets after you’re gone. Estate planning also includes your healthcare directives in the event you are unable to express your wishes for your medical care. If you are unconscious or incapacitated, having your healthcare directives established in your estate plan will not only ensure your wishes are honored, but it takes the burden off your loved ones to make these impossible decisions in the moment.
Designating a Power of Attorney (POA) will enable the person of your choosing to access your bank accounts, pay your bills, and manage your affairs if you are unable to perform these duties on your own. Without a POA, important financial matters may be abandoned until you recover and that could have long-term consequences for your finances and anyone who relies on them.
Conclusion
Estate planning is as much for you as it is for the people you love the most. From protecting financial assets from being tied up in probate court to eliminating conjecture over what measures you would want doctors to take to preserve your life, proper estate planning will communicate your wishes.
If you don’t have an estate plan, don’t delay any longer.
