Estate planning is vital for everyone as it helps you secure your family and assets if you pass away. With an estate plan, you can list who gets your assets. You can also use it to add guardianship and protection language for your minor children.
In short, the will directs how your finances, assets, or estate are disposed of, managed, or given to the people you leave behind after your death. That way, you can prevent the likelihood of mishandling or mismanagement of your assets or family when you’re not around. As such, you may want to consider the following estate planning tips:
- Create A Plan
Having a plan for your estate includes essential documents like a will. You must have this when your finances are pretty simple. For instance, you plan to leave all your assets to one person since you don’t have a legal partner or children. However, if you have more complex assets, such as retirement savings accounts, investments, and properties, and you have minor children, you may need a different plan.
You may want to consult with experts like the Hopkins Roden Lawyers or similar professionals who know estate planning to ensure that you follow the laws of your state when storing, filing, and completing documents. You may also have to prepare some of these documents, depending on your current situation:
- Powers Of Attorney: You’ll need this document to have someone decide on your behalf in case you become unable to make decisions aside from planning for the care of your children and distribution of your assets. The power of attorney documents may have ‘medical directives’ which outline the decisions your family members must respect in serious medical situations. You can also include a ‘do not resuscitate’ (DNR) order for life-sustaining treatments. And you can also have the financial power of attorney appointing someone to take care of your assets when you become incapacitated.
- Trust: Besides describing the distribution of your assets after death, you can also use a trust to designate people who will take care of your minor children. Most importantly, a trust can help you avoid probate and minimize taxes on your assets, which are the main differences between a will and a trust.
- Will: This document is vital regardless of your estate’s size or marital status. You can use it to designate how family heirlooms or jewelry will be divided, or who you want to own your assets after your passing. If you have minor children who will inherit your estate, a will is essential so you can designate a guardian who will manage their assets. That’s because minors can’t own property until they reach the age of maturity.
- Designate Beneficiaries
You can bypass trust or will when you designate beneficiaries directly to your accounts. It can apply to life insurance, retirement, and savings accounts. When you depart this life, your beneficiaries named in your qualified plan account, annuity, and investment retirement account (IRA) can receive such assets.
Although estate planning and beneficiary designations don’t coincide with standard beneficiary information, you shouldn’t ignore them since they’re highly interrelated. It means you should update and review them regularly in case there are changes you want to make to each plan. With such, you should coordinate with your estate plan when naming contingent and primary beneficiaries to meet distribution objectives.
- Have A Succession Plan And Business Relief For Your Business
Protecting your business should also be a priority when you’re an entrepreneur. When you pass away, your estate plan should specify how your business will be managed. Without such, you may not be able to pass your business to your grandchildren or children, especially since one of the reasons why you nurtured your business is to leave a legacy to your loved ones.
All of your business assets and properties could fall within the value of your estate. It means you can’t protect the total value of your business, and worse, your heirs may have to pay a hefty amount of inheritance tax (IHT). In some cases, heirs don’t have a choice but to sell the business so they can use it to pay for the said bill.
You can avoid such circumstances by protecting your business through a succession plan. This up-to-date will describes how your business will be distributed upon your death. A succession plan will also prevent legal claims from divorcing spouses or creditors on your other financial assets or business.
Moreover, you should also include the distribution of your shares and the running of the business to prevent issues. As such, you can be assured that your business will operate successfully and effectively even when you’re not around.
Aside from that, you can also reduce IHT liability with business relief. It means effectively exempting your business from IHT when transferring your business assets. The reductions could even be as high as 100% for some assets.
But generally, you can get 50% relief on your business’s machinery, buildings, or land. This reduced rate is vital since such assets contribute a high percentage of your business’s overall value.
If you have shares in an unlisted company, you may also enjoy 100% relief on the interest in a business or the business itself. However, you can only apply for this when you have owned the company for at least two years.
- Get The Right Level Of Insurance
Your beneficiaries can enjoy your insurance accounts when you pass away. You can also use insurance to protect your wealth, estate, and family from unforeseen events. However, you must choose the best insurance policy products to maximize the protection you need. Instead of getting a lot of insurance policies, it may be best to seek professional advice to know the best one to secure your family and business.
Estate planning can protect your family and assets from unfortunate events or when you pass away. An estate plan will ensure your wishes will be followed instead of letting your state take charge of how your assets will be distributed or how your family will be protected. Thus, you may have to create a plan suitable to your financial standing, designate beneficiaries, have succession and business relief, and get the right insurance coverage. Doing all of these tips may help you protect your loved ones and wealth effectively.