Contemplating our own mortality is no fun. Unfortunately, it’s a reality of life, so it’s important to be prepared. Whether you are the owner of a business, hold several properties or just have family that you want to see taken care of after you’re gone, it’s essential to plan for the future. If you’ve been having trouble getting started with the estate planning process, here are a few tips to make the procedure easier:
Understand the importance of estate planning
Knowing the benefits of having an estate plan and the drawbacks of dying without one in place, called dying intestate, can be a great motivational factor. If you die intestate, your family will have to go through probate to take possession of your assets, which can be an arduous process and gives the state the power to decide how your heirs receive your property. You even run the risk of your assets becoming a possession of the state if none of your heirs fit the state’s standards. The best-case scenario is that your heirs get their inheritance, but are subjected to an estate tax that can cost them up to 40 percent.
There are a few simple steps you can take to get your estate planning started. First, try setting a deadline for yourself. Whether it is your next birthday or the end of the year, having a firm date to get your affairs in order can give you the motivation you need. Once you’re ready to start the process, it’s time to make lists. The first one should be all your assets and liabilities, which includes any financial accounts, real estate holdings, cars or other title property, insurance policies or other items of special value. Next, list all your desired beneficiaries – including children, grandchildren, your spouse, extended family members and any friends you would like to leave money or assets to – including their full names, dates of birth, current addresses and relation to you. Give some thought as to whom you would want to receive your various possessions and organize that information into a chart. If you have children who are minors, have a discussion with your spouse and decide on a guardian for them if anything should happen to both of you.
Hire a lawyer
Once you have gathered your thoughts and information, it’s time to consult a lawyer. Speaking to someone who specializes in estate planning law will be extremely helpful for a couple of reasons. A CPA will help you understand how much liquidity you’ll need to cover any taxes or fees your family will have to pay when you’re gone, as well as ensure they are financially taken care of. Because estate taxes are likely the largest single tax expense you will ever have to pay, it’s important to speak to someone who knows the ins and outs of the law and can make sure you are not paying more than you have to. Laws differ from state to state, so getting general information from a website that is not specific to where you live may hurt you in the long run.
Keep up with estate planning
Once you have established your will and other aspects of the estate planning process, don’t just file it away in a drawer somewhere and forget about it. Financial situations change in everyone’s life. Whether you come into a large sum of money or sell a home, you need to be sure your information is updated. Personal and business relationships may change as well, and you may decide you no longer want to leave an inheritance to a friend, family member or former business partner. It’s a good idea to revisit your plan every few years to ensure that it continues to meet your everchanging needs.