For most individuals, preparing an estate plan is not high on the list of fun things to do. Deciding the fate of your belongings when you pass away can be a complicated and difficult task. This is especially true of individuals who have incurred a great deal of assets over their lifetime. No matter your age, here are some things you may want to accomplish this year with regard to your estate plan.
- Review and/or create a will – A will is an essential document that surprisingly, many people do not have. According to a survey conducted by the legal services company Rocket Lawyer, 50 percent of all Americans with children do not have a will. In addition, 41 percent of baby boomers have not taken the steps to write out their wishes in a binding legal document. This simple step will ensure that your belongings are divided as you wish and will save your family members the headache of dealing with issues such as probate when you pass.
- Create a trust, power of attorney and other important directives – Just as important as a will are the ancillary documents that provide insight into your wishes in the event of a medical issue or unforeseen situation. These documents will instruct your loved ones regarding your wishes should you be unable to speak for yourself. In addition to a trust, other legal documents might also include a durable financial and a medical power of attorney, a living will and other items.
- Determine beneficiaries – Most often beneficiaries include a surviving spouse and/or children. Take the time to ensure that your beneficiaries agree with the terms of your will. If you name one person as a beneficiary in a will, but another on a document such as a life insurance policy, that individual might be in line to receive a benefit even if your will states differently. We recommend reviewing your beneficiaries on a regular basis to ensure that all of your documentation reflect your wishes.
- Reduce the size of your taxable estate through gifting – As of 2015, the lifetime individual federal gift, estate and generation-skipping tax exclusion amount was set at $5.43 million. This means an individual can transfer up to $5.43 million during or after his or her lifetime tax-free. For a married couple, the unified credit is $10.86 million.
- Select a reliable executor – Your executor, as well as anyone named in your will or other estate documents, should have copies of all necessary documents. In many cases, parents choose their children to be executors of their estate. While often times this plan is sound, sometimes it can be a poor choice.
Consider these things carefully:
- Could your named executor die before you do?
- How well does he or she comprehend financial matters or the basic principles of estate law?
- Can you easily communicate changes to your will with your chosen executor?
- Does your executor have a vested interest in your estate? (Will they be fair? Can they be trusted? Will their spouse or significant other cause issues?)
- Does your executor have an amicable relationship with other family members?
- Should you consider a third-party to be your executor? (Financial Fiduciaries’ trust services partner, Vigil Trust is often asked to serve as an estate executor)
When in doubt about your estate plan, take some time to talk to a trusted professional. While it might save you money up front, do-it-yourself planning can create future problems, especially if your estate is complex. If you have questions, feel free to contact the team at Financial Fiduciaries.