Estate Planning Basics 7 Essential Steps to Protect Your Family

Estate Planning Basics: 7 Essential Steps to Protect Your Family

It may sound like a bleak topic, but estate planning is a prudent way to keep your assets in the family. In a nutshell, you need to make sure that everything is in order with your estate in case of disability or death. This type of preparation is suitable for small and big properties since the main goal is to take care of your family in the future.

Although you can’t know when or what might happen, you can include various scenarios that can cover possible outcomes. Instead of relying on chance, take the following essential steps to protect your family and take care of the estate planning basics.

1. Make a list

It’s always good to start any business with a list. This time, you will have to document your assets, heirs, beneficiaries, possessions, wishes, and other things of importance. For example, you should think of a person who will make health decisions for you or financial ones in case you are unable.

Write down the names of people you want to include in the division of your estate, from guardians, lawyers, to loved ones who will inherit it all. If there is anything special to pay attention to, put it on the list as well so you remember to include it in your will. A detailed and thorough list will allow you to better organize your time and be more focused on the practical rather than the emotional nature of estate planning.

2. Prepare a will

The truth is that preparing a will is not easy, because it reminds you that something bad may happen, but it’s a necessary step. Not everyone has a will — it’s not mandatory or considered needed. If you don’t have a will, the division of your property will go to court and may cost your beneficiaries a hefty sum.

But drawing up a will is not the end of it. To stay current with family dynamics and relationships, you need to reread your will from time to time and apply changes. Having a will can give you peace that everything you worked for and created is in good hands.

3. Set up a trust

There is always a worry that the heirs you chose might not be the right people to inherit your estate. If so, you can establish a trust and a person to distribute your wealth. That person is called a trustee and they will control the money, but not without limitations if you specify so in the conditions and terms.

Not all trusts are the same. In the event you decide to set up a permanent trust, your money may not be subject to estate taxes. This happens because the assets, in this case, don’t belong to you anymore but to the trust.   

4. Name beneficiaries

Since some assets can’t be distributed based on a will, or if you don’t have one at all, you should consider whom to appoint as beneficiaries. Life insurance policy and retirement fund are some of the most common accounts that allow you to have a beneficiary.

You don’t have to have beneficiaries, but without them, the court will have to decide who should receive the money from the disputed account. Keep in mind that appointing beneficiaries trumps what is stated in the will. So, check whom you appointed from time to time or after major events, like a divorce or a new child in the family.

5. Distribution of assets by ownership

Beneficiaries, will, and trust are not the only means to use in estate planning. If you have assets under the joint tenancy with someone, then in case of your death, that person will inherit them. Joint tenancy is a type of ownership that means that you and your partners are all owners of the whole asset. Having a will on this matter is inconsequential and the right of survivorship supersedes.

When it comes to tenants in common, every partner owns a share of the asset. This means that if you bought a property this way with your partners, you have to name the beneficiary of your share.  

6. Hire help

You will certainly have questions regarding the legal aspects of estate planning or need a way to resolve issues you don’t want to burden your heirs with. Finding a legal representative or executor is essential to make sure that all your assets are properly divided and taken care of. Also, consider hiring conveyancing experts to mediate in the process of transferring the assets to the third party of your choosing.

If you are not good with finances, an accountant can help you sort out your bank accounts, debts, loans, and taxes. A temporary assistant is a good idea if you are too busy or have a large estate to review and put in order.  

7. Give your assets during life

You don’t have to be incapacitated or dead to give your money to your heirs. It’s more a matter of gifting them that money according to the rules and regulations. This gifted money is tax-free for the heirs, and estate tax should be lower as well. But when it comes to assets that are not money, like a property or shares in a company, you need to play it safe.

After a person’s death, the tax on some assets may be reduced. So, it’s better to arrange that these assets are transferred after you die rather than before. Charitable donation through a donor-advised fund can also bring a tax deduction and you can name your child or grandchild as a succeeding manager.   

The bottom line

Estate planning may feel uncomfortable or demanding, but it can provide for and protect your family after you are gone. If you don’t understand what needs to be done, hire and consult professionals to get your assets in order. Moreover, don’t forget to revisit the decisions you made to make sure they are still the right ones.

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