Estate Planning Basics – Here’s What You Should Know
Estate planning sounds so grandiose that you could easily dismiss it.
The reality however is that everyone has an estate.
It may not be a million dollars in liquid cash, but as long as you own it, it is an estate and thus you should make preparations for it for two scenarios:
- If you ever are unable to make decisions because of an incapacitating illness
- In the event of your passing away
What will happen to your finances, homes, cars and investments when you pass away?
Have you appointed a power of attorney if you are ever unable to make decisions that affect your life?
As a caregiver, are these questions you have brought up to your elderly loved one?
I’ll admit. It is difficult to talk about death; let alone plan for it.
However, talking about it and making plans now will avoid a lot of confusion and family drama later on.
Estate planning simply refers to an advance plan you make that decides who (a person/people or organization) gets your possessions once you die.
In today’s post, we will be talking about estate planning basics everyone should be aware of.
This information is useful for you both as a caregiver and as an individual.
Estate Planning Basics- Here’s What You Should Know
7 Facts about estate planning
- Everyone needs a plan. Not just seniors or retired people.
- If you don’t have an intentional estate plan, your state government will decide what happens to your possessions after you die. It is unlikely that you would be happy with it. All the more reason why you should have an estate plan.
- Planning your estate will help you organize your records. Sometimes you may not even realize that certain bank accounts or money due you is part of your estate. By planning now, you can account for all those pieces of property you don’t even think about.
- As I mentioned earlier, planning now will avoid family drama later. So many families are thrown into turmoil with lawsuit after lawsuit after a loved one passes away and no will is left.
- Pass on your values on money and hard work when you plan your estate.
- A good estate plan also includes creating an advance directive where you appoint a power of attorney who can make health decisions for you if you are ever in a state where you cannot make decisions for yourself.
- An estate plan will ensure your dependents are taken care of in the event of your death.
Yes it is true- an estate plan will not completely wipe out or solve the issues raised above.
It can however significantly reduce their occurrence.
What should your estate plan include?
Your estate plan should cover as wide of a scope as possible.
Even though we cannot cover them all in this post, your estate plan should the following areas.
PLEASE NOTE: Even though we are including many of the aspects of estate planning here, please talk to your attorney to make sure all your bases are covered.
- Protecting your assets. It is important during estate planning for you to take stock of what you own. It is important to make a list of bank accounts, investments, homes, cars, furniture etc that are in your name and nobody else’s. If you co-own something, it is important that you and the person or persons who co-own the asset with agree to what will happen to your portion in the event of your death. Write down this agreement. A lawyer should also witness the agreement. And even with things that you co-own, depending on state law, your portion could go to the surviving co-owners who can then decide whether or not they want to turn your portion over to your family.
- Business planning. If you own a business, what happens to the business after your death is also an important thing to include in planning your estate.
- Disability and illness. In case of a disability or incapacitating illness, what decisions do you want to be made? Where will the money come for your care?
- Elder care. What are your preferences when it comes to elder care? How will your loved ones pay for it? Whether you or your elderly chooses home care or assisted living, there will be a cost involved. Being clear as to your preferences will clear up confusion later on.
- The administration of your estate. This involves naming an executor who will oversee the distribution of assets after your death.
- Giving. Do you want to leave money to an organization you care about? Estate planning will help you take care of that as well.
- Inheritance. Do you plan on leaving portions of your estate to a surviving spouse, children, grandchildren or other relative? Estate planning includes planning the inheritance you will leave behind. Setting up beneficiaries of plans such as life insurance, 401Ks and IRAs are also included here.
- Retirement planning. Planning for your retirement starts NOW. Not when you are ready to retire. This is why I mentioned above that estate planning is not just for the elderly.
- Guardian appointment. Estate planning is not just for the elderly. If you have minor children, it is important to name a guardian who will take over the care of your children in case of your death. You love your children and want to leave them in the hands of someone who will do a great job. Not someone the state has appointed to take care of your children.
- Funeral arrangements. These will include plans for your funeral ceremony and decisions as to where you would like to be buried or whether you would like to be cremated.
- Estate taxes. You don’t want to leave your family with huge tax bills for your estate. Speak with a lawyer who is well-versed in tax law about this. It will help to reduce this financial burden for your family after you die.
As you can see, you have to take a lot into consideration when you are planning your estate!
And this is the reason why planning your estate starts right now.
As a caregiver/adult child/loved on of an elderly person who has no such plan in place, it is best if you can encourage them to do so as soon as possible.
As a young person who is reading this, all this advice applies to you too.
We recommend that you or your elderly loved one begin by making a list of all you own and then using the different categories stated above, make a plan for what will happen in case of your death.
Once you have written this down, you can hire the services of a lawyer for a few hours to oversee what you created and offer suggestions.
The point here is to have a plan in place before you ever need one.
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