Estate planning is often overlooked because of its complexities. But everyone should think of estate planning despite their age or health. It helps in ensuring financial security for your loved ones.
You should consider these critical factors during estate planning, and the factors will be discussed below.
1. Analyze Your Financial Status
You should gather your financial documents before going to an estate attorney’s firm. You should review your financial records and determine the total value of your assets as well as your expected cash flow.
- How To Determine The Net Worth Of Your Assets
You can determine the net worth by comparing the cash flow and assets to the total liabilities. You should also consider what might affect your finances in the future. This includes living expenses, retirement plans, or some unexpected spending in the form of an illness or accident. You should convey your financial status to your attorney so that the estate plan can be devised accordingly.
2. Consider The Needs Of Your Beneficiaries
A will estate lawyer will help you in naming your beneficiaries. It includes appointing beneficiaries for an insurance policy, investments accounts, retirement accounts, and others. It is your choice how you want to distribute your assets.
- How Can You Divide Your Assets
You can divide it among your family members or even donate it to a charitable organization. But you need to consider the future needs of the beneficiaries before distributing assets. Sometimes the funds in a trust can be used by your beneficiary to meet specific expenses such as college fees. If you have a disabled beneficiary, you can even set up a special trust fund for them.
3. Reduce Your Taxable Estate
A significant portion of your assets allotted to a beneficiary may be used up in paying taxes. But a certified specialist in estate planning can exempt your beneficiaries from paying taxes. They will implement strategies that will reduce the tax obligations of your beneficiaries.
- Ways To Reduce Your Taxable Estate
You can create a testamentary trust to divide your assets in a tax-effective way. It will also help in minimizing the challenges to your will.You should also buy life insurance for your heirs. It will be able to cover the estate tax that your heirs will be required to pay.
4. Create A Power Of Attorney
You need to arrange for a POA. A person given the POA will manage your estate affairs if you become incapacitated. Therefore, you need to find someone trustworthy. They will be responsible for making financial decisions for you when you are unable to.
- Benefits Of A POA
A POA helps you decide who will make financial decisions for you. Otherwise, the court decides who will be responsible for handling your finances. It also reduces internal conflicts within a family.
If you suddenly die or become incapacitated, a lack of POA will cause your family to argue about asset distribution. However, a POA is proof of your intent and is unlikely to cause family disputes over asset distribution.
5. Designate Legal Guardians For Your Children
It is one of the most crucial things to consider when it comes to estate planning. You will have to think about what will happen to your dependents if you die tomorrow. Setting up finds for your dependents is not enough. You also need to designate legal guardians for them.
- Why Should You Designate Legal Guardians For Minors
Your dependents will lack the maturity to handle finances. Therefore, a legal guardian needs to take care of the funds on their behalf.
The legal guardian will be responsible for the upbringings of your children in your and your spouse’s absence. The children will handle the funds once they become legal adults.
6. Making An Advance Health Directive
An advance health directive is a legal document laying out your medical wishes. The document can also mention what kind of treatment you do not want. This will be beneficial in a situation where you are unable to tell what kind of treatment you want.
- Benefits Of An Advance Health Directive
It will lay out guidelines for dental and surgical treatment as well, including medical treatment. Health care professionals are bound to follow your wishes as per the health directive.
Even if you have an enduring guardian, the advance health directive will get precedence over it in terms of medical decisions.
You should consider the factors given above to ensure that your estate planning is adequate. You must develop an elaborate idea about your financial status before meeting with a lawyer.
Additionally, you should understand the needs of the beneficiaries and divide your assets accordingly. You should take services from an estate planning law firm to minimize the tax burden on your heirs.
You have to create a power of attorney and designate legal guardians for your children. You can even make an advance health directive to make medical decisions on your behalf when you are incapacitated. However, you should choose a reputed estate lawyer firm to ensure that you get proper advice.