In its most basic form, estate planning documents are a series of decisions about what should happen to everything you have, if you die. A common artifact of estate planning is the creation of a will, which is a notarized document that outlines how your property should be disposed of. As you get older and your estate becomes more complex, you can upgrade your will to include a living trust, power of attorney, and other estate planning features. In this edition of WTFinance, we’ll take a look at estate planning, why it’s important and how to get started.
What is Estate Planning?
You can generally think of financial planning as how to grow and protect your wealth throughout your life. But an important part of financial planning involves planning what will happen to all of your assets after your death. A simple estate plan can only include a simple will, leaving all of your assets to one or more beneficiaries.
But as you accumulate more assets or your financial situation becomes more complex, you can upgrade your estate plan as well. Depending on your financial goals, you may want to create a living trust, which may have tax benefits when thinking about your inheritance and inheritance. As you get older, it’s also a good idea to establish a medical or other power of attorney – that way if you find yourself in a situation where you’re not able to make your own decisions, you can pass that responsibility on to someone else. You can entrust it to someone you trust.
Why it is important to have an estate plan
If you are just starting out or don’t have a lot of assets, you might think that there is no need to bother with estate planning. However, the truth is that there are no advantages and many disadvantages to dying without a will (without a will). Anyone with any assets must have a will.
Even if you don’t have a lot of assets or think it should be pretty straightforward that everything you do have will go to your spouse, parents, or children, it doesn’t. That’s how the probate system works in most places. If you die without a will, it may take weeks or months for your loved ones to access some of your assets. You don’t want to cause any additional complaints or suffering to your loved ones due to lack of adequate estate planning.
When you should start planning for your estate
You should start an estate plan as soon as you are living on your own or have a property. A simple will can be a good start if your estate is small. You can use will-making software or consult a lawyer to make a will. Make sure you check your state’s probate laws to see what is required to make a legal will in your state.
As your assets grow, you may consider creating a living trust as a part of your estate planning. A living trust is not the same as a will, but both types of documents can play an important role in helping you plan how you want to divide your assets in the event of your death.
How to get started with a basic estate plan
The biggest reason that most people don’t do any estate planning is because it can seem overwhelming. Prioritizing estate planning isn’t easy, especially if you’re not sure how to get started. If you find yourself in that situation, here are some basic steps for creating a simple estate plan:
- Inventory Your Assets – Include big ticket items like your home, cars, jewelry as well as sentimental items that you want to give to specific people
- Determine Your Beneficiaries – You want most of your assets to go to a spouse, parents or children, but you can also make specific bequests of individual items as you see fit
- Understand your state’s probate law – The laws for making a will will vary by state and jurisdiction; Make sure you understand what constitutes a legal will where you live.
- Draft and sign your will — Depending on how comfortable you feel with each option, you can use devise software, an online site, or consult an attorney
- Review your plan regularly Times change and your estate plan should change with them.
If you own a property, you’ll want to make sure you have a plan in place for your property. Even making a simple will, naming your assets and beneficiaries, will be enough to keep your assets out of probate court. This can simplify the process for your loved ones during very stressful times. If you don’t have a will or estate plan, make it one of your financial goals this year.
What is fire movement + how to make it…
how to build generational wealth
In this edition of WTFinance, we’ll take a look at estate planning, why it’s important and how to get started.