Estate planning is something that needs to be considered as soon as possible and revised with regularity. Many people neglect their estate planning under the misguided assumption that they can do it later; unfortunately, the worst can happen unexpectedly. Estate planning is absolutely critical in ensuring that a person’s estate is appropriately distributed not just after their death but also after the death of their loved ones.
1. Trusts will likely be your most important tool. Constructing a trust is usually the best way to transfer an asset. Trusts have many benefits, not the least of which that control is maintained throughout the existence of the estate, not just after the first transfer. In other words, if you leave your estate to your wife and she later marries the estate will likely go to her new husband in the event that she dies; you have no control over this. However, if you instead create a trust with the appropriate directives you can have the estate go to your children instead, regardless of your wife’s will.
2. If you have debts that exceed your assets, there won’t be anything left over. Some people neglect their finances to the extent that they don’t realize their debts are exceeding their assets. Upon your passing, your debts will be paid out of your estate first. This means that you will need to plan for the fact that your current debts may wipe out your assets; thus rendering some of your asset allocations mood. Always have a contingency plan for the paying of your debts.
3. Estate planning isn’t just for the rich. Some people hear the word “estate” and begin imagining mansions and large stock portfolios. Estate planning is for everyone, not just the wealthy. As long as you have family members that you care about and that you love it is time for the appropriate estate planning. Estate planning is simply the method by which you will allocate your assets to the people that you love.
4. You will need both a health care proxy and a power of attorney assignment. Estate planning isn’t just about the financial side: it’s also about who will make decisions for you on a medical and legal basis. While a health care proxy and person with power of attorney are usually the same person, they don’t need to be. A health care proxy is the person you trust in making medical decisions for you if you cannot make them yourself, and a power of attorney representative is the person who controls aspects of your legal and financial life.
5. You need to discuss your plans with your family. A lot of confusion, hurt feelings and disputes are the result of improperly discussed estate planning. Your family needs to know why you have made the decisions you have made, and they need to be certain that they are the decisions that you made. If at all possible you should sit down with your family and discuss your estate plan as soon as you complete it.