If something were to happen to you today, how would the overall financial profile be handled and who would make the final call? The fact that half of the population are missing an active will just shows how important estate planning can be in the event that tragedy should occur.
While the plan may to remain healthy for a long life, when it comes to a spouse, children, and even grand-children, preserving a legacy, along with the assets, is important for a smooth process after you’re gone. A few tips for proper estate planning can ensure the major details are worked out in advance so there is no confusion after the fact.
The Difficult Discussion is Necessary
Sure, a conversation regarding your final demise may be a difficult one to have with loved ones, but it’s one that’s necessary to plot out all the details needed within the estate. First, taking inventory of all assets & liabilities will be important in figuring out not only net worth, but payments that will need to be distributed in order to pay off any outstanding balances and close the accounts. Next, a determination of who will manage the plan and execute wishes, typically a friend or family member, will need to be decided. While professional help is not required, it may help sort out the details for a complicated estate planning process.
A Modified Endowment Contract May be Useful
As assets are sorted out, tax implications can be a large factor in distribution. Endowment insurance can be a great option if leaving heirs a large, tax-free amount, with no additional out of pocket costs comes to mind. Before converting assets, you’ll want to make sure the process is followed accurately to avoid a large tax bill later on down the road. During estate planning you can review funds to ensure the proper amounts are allocated so there is not a shortage prior to death.
Execute a Proper Will or Trust
While both are tools for essential estate planning, a decision will need to be made on which option best meets your needs. If staying away from probate is high on the list, then a trust could make more sense in order to avoid having a court oversee, as well as maintain privacy. A will would become part of a public record. If looking to name a guardian for children or plan funeral arrangements, then a will could meet your specific estate requirements.
A Power of Attorney Could Protect Finances
In the event of incapacitation, selecting a power of attorney is a great option to choose a trusted representative to manage financial affairs and avoid going by the wayside. There are limitations that can be selected based on when you’re comfortable taking action. Often couples will select each other as power of attorney, although there certainly can be a friend or another family member to act on your behalf. Keep in mind that this benefit will expire at death, so it should not be assumed that this same individual will represent the affairs long after you’re gone.