People often put off estate planning, and there are plenty of reasons why. Some think they don’t own enough or are not old enough. Others may be confused about the process and who to ask for help, or they simply don’t want to think about it.
While statistics show that only 42 percent of American adults have a will, failing to put an effective estate plan in place can have serious consequences. Not only are you leaving your estate to be settled in accordance with state law when you die, but your inaction may be costly, both financially and emotionally, to the people you care about most.
Creating a comprehensive estate plan relieves loved ones of the burden of making decisions and helps ensure that your final wishes are carried out after you pass away. If you’ve made a resolution to plan your estate this year, here are five steps you can take to make it happen:
1. Understand what’s involved
Everyone has an estate – no matter how large or how modest. Your estate is comprised of everything you own, from real estate, checking and savings accounts, and life insurance to your personal possessions.
An estate plan provides clear instructions as to who you want to receive the things you own, what you want them to receive and when. The basic elements of an estate plan are:
A will: Naming an executor, designating who will inherit your property and assigning a guardian for your children if necessary. Arrangements for digital assets like passwords to banking sites and social media accounts are becoming more common in wills, as are provisions for pets.
Assignment of a financial power of attorney: Giving someone you trust authority to handle your finances if you become incapacitated.
A living will or healthcare directive: Stating your wishes for the kind of medical intervention you want in the event that you become terminally ill and unable to communicate. Health care directives include a health care declaration ("living will") and a health care power of attorney (authorizing someone to make medical decisions on your behalf.)
Final arrangements: Instructions regarding burial or cremation, organ donation and payment of funeral expenses.
2. Take stock of your assets.
Making a complete list of your assets is often the biggest step you can take towards establishing an estate plan. Be sure to include investments, retirement accounts, insurance policies and business interests, as well as items of value such as jewelry, artwork and other collectibles.
3. Choose your beneficiaries.
Once you have your list of assets, you will need to decide what to accomplish with them and who you would like to inherit them. Parents often leave their estates to their spouses, children and/or grandchildren, but many individuals also choose to make charitable contributions or leave items to non-family members.
If you are concerned about how certain assets are going to be distributed after you die, you may want to consider opening a trust. A trust is a legal entity that allows you to put conditions on the distribution of your assets, such as earmarking specific funds to cover education costs or special needs expenses for designated family members. If you expect your beneficiaries to owe estate and income tax on what they inherit, consult your financial advisor regarding strategies to minimize these taxes.
4. Meet with an estate planning attorney.
An estate planning attorney can help you design your will and trusts, as well as offer guidance on other aspects of your estate plan and ensure that it meets federal and state requirements. It is advisable to work with a local attorney who has a thorough understanding of the laws in the area where you live.
There are a number of online estate planning software programs, such as LegacyWriter, ZoomLegal and Quicken Willmaker, that allow you to create your own will. This may be a viable option in some instances, but for individuals with significant financial assets or complex family situations it is best to seek expert advice.
5. Discuss the details with those involved.
Once you have the details of your plan in place, discuss them with everyone involved. This provides the opportunity for loved ones to ask questions, clarify your instructions or let you know if there are items that are especially meaningful to them. Being open about your intentions lessens the likelihood of surprises, confusion or disagreements when you are gone.
If you need professional help creating an estate plan or revising an existing one, we can help simplify the process, explain your options and help insure that your wishes are honored. Please call us at 973-509-8500 x213 or email LFarber@LFarberLaw.com.
The contents of this writing are intended for general information purposes only and should not be construed as legal advice or opinion in any specific facts or circumstances.