The best time to plan for your future is now.
Many people don’t create an estate plan because they think they don’t have anything worth protecting. But, without a plan, an unexpected death or illness can leave your family in ruins.
We’ve witnessed first-hand the turmoil that is left behind if there is no guidance. Oftentimes, families spend countless dollars arguing over assets instead of grieving. That’s why we’ve listed some of our top estate planning tips below.
Clearly List Your Wishes
Many people have a misconception that an estate plan is only for the wealthy or someone with a lot of assets. However, an estate plan is simply a way to ensure your legacy is protected. That’s because an estate plan clearly outlines your wishes for your assets and dependents after you pass. Failing to have everything clearly stated can result in your assets going into probate and a judge ruling on where your dependents will go.
Further, an estate plan can list what will happen to your assets or dependents if you become incapacitated. This is done with the help of an ‘advanced directive’ document. An advanced health care directive is an additional set of paperwork within an estate plan that states your preferred medical treatment plan (including what medical treatments can or cannot be completed on you). For this document to be valid, it will need to include a living will and list a healthcare power of attorney (POA).
Beneficiary Designations
One of the first things that needs to be done when creating an estate plan is to list your beneficiaries, and exactly what they will be getting. While doing this, keep in mind that money goes to an account holder (not the beneficiary), regardless of what your estate plan says. These accounts include bank accounts, retirement plans (401k’s, IRAs) and life insurance policies. So, be sure to review your paperwork regularly to ensure your accounts are aligned with your estate plan.
Consider Trusts
There are a variety of trusts that can be used to hold money and assets to ensure they end up exactly where you want them. Although these can be structured according to your unique needs, they are essentially a way to ensure your plan will be followed exactly as you want it to be.
The most common types of trusts are irrevocable trusts which can’t be changed once it’s created (can be used to protect against creditors, taxes and lawsuits), revocable trusts (allowing you to revise it while you are living) and charitable trusts (donations).
Plan for Federal and State Estate Tax
It is important to keep in mind that there is a federal estate tax on assets such as cash, real estate, stocks and more. This means your beneficiaries will need to pay up once they receive their inheritance as taxes are typically due within nine months of a death.
Minimize the stress of tax liability by taking preventative measures like placing assets in an irrevocable trust or giving gifts to family members before you pass. Regardless of how you decide to plan, we recommend speaking with a tax professional who can offer a personalized suggestion on which strategy is right for you.
At A.P. Accounting & Tax Services we believe that everyone is capable of having a secure estate plan. If you don’t have a plan but are thinking of creating one, give us a call at 407-328-5001.
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