Is it wrong to assume that wills, trusts, and estate planning are only for the wealthy? Absolutely.
You don’t have to be rich and influential to declare your estate. All personal assets should be part of your estate plan, whether they’re worth less than $1,000 or more than a million dollars. The estate plan could include your residential property, your vehicles, and your financial savings. Other personal belongings such as your jewelry box or your trinket collection could also be part of your estate.
Estate planning isn’t just about your possessions and financial assets, and who will take ownership of them when you die. It also involves healthcare and medical decisions for your future. It eases your family’s stress and worries if you get sick or when you pass on.
Here, we answer some of your most pressing questions about wills, trusts, and estate laws.
Can you draw up a last will and testament on your own?
You may opt for a do-it-yourself kit if your finances and financial wishes are fairly straightforward. It’s also a suitable option if you don’t have children or other dependents. If you aren’t familiar with legal jargon, however, you might want to consider talking to your attorney about estate planning.
Also, keep in mind that do-it-yourself kits don’t cover all life situations that will be taken care of by your lawyer if you opt for their assistance with your estate planning process.
Is there more to estate planning than a last will and testament?
Your last will and testament is the most widely known part of your estate plan. Commonly known as the will, it outlines how you want to distribute your assets at your passing. It lets you name the people who will receive specific assets when you pass on. It also saves your family the hassle of the probate process.
There’s more to estate planning than discussing which possessions to leave with trusted family and friends. You also have to consider what could happen if you suddenly become incapacitated or terminally ill. Your estate plan should include a healthcare power of attorney and a financial power of attorney.
What are healthcare and financial powers of attorney?
A healthcare power of attorney is a legal document that names an individual as your healthcare decision-maker in case you become terminally ill, incapacitated, or unable to communicate. The document also states your decisions about life support and life-sustaining medical intervention.
A financial power of attorney is similar to a healthcare power of attorney, except this legal document states who will be your financial decision-maker in case you become incapacitated. They would be the only one who can manage your bills, investments, and other financial matters.
It’s best to draw up these documents at the same time as your last will and testament so you don’t have to worry about them later on.
How do you ensure proper distribution of assets among loved ones?
One of the toughest challenges with estate planning is deciding how to best distribute your assets. While there’s no guidebook about which assets should go to which family member or beneficiaries, you can always narrow down your choices using three factors: liquidity, sentiment, and tax planning.
Liquidity refers to the value of your personal assets. Liquid assets are something that can easily be converted into cash, without a huge toll on the market value. Assets that would take at least months before their value can be converted into cash — such as your home — aren’t considered liquid assets.
You have to know the value of your liquid assets so you can minimize gift and estate taxes that your loved ones have to pay for. You also want to make sure your loved ones have immediate access to the funds that they’ll get from the liquid assets so they can pay bills, purchase necessities, and support themselves.
Sentiment involves all personal properties that have sentimental value. This could include properties with a high dollar value, like a vacation home or your family home. Or it could be simple objects with high emotional value, like your record collection or jewelry that has been passed down in your family.
You can avoid internal conflicts and estate fights between family members by discussing the distribution of these assets with them early on. This way, they’ll graciously accept your decisions when you pass on.
Tax planning is arguably one of the most important parts of estate planning. Beneficiaries might experience challenges with your estate, if the assets you pass on to them require gift taxes or if selling them would have high tax consequences. So in addition to ensuring that your loved ones have immediate access to your estate, you want to make sure the liquid assets go to who will benefit from them the most.
Get in touch with your local attorney for an organized arrangement and management of your estate.