An estate plan is vitally important, no matter the wealth or age. To be effective, your plan should be reviewed every 2-5 years or when major life events such as marriage and divorce, children, large purchases or changes in financial goals arise.
An effective estate plan includes strategies for passing on assets to heirs without incurring costly capital gains taxes. Here are some pointers for getting started:
1. Create a Will
Wills can make it simpler to pass down both financial assets such as savings accounts, investment portfolios and real estate to beneficiaries as well as physical items like cars or furniture. A financial advisor can assist in selecting beneficiaries as well as include contingent beneficiaries should one die before you.
Financial planners can also assist in creating a budget that ensures your inheritance goes toward paying off debt and investing for future success.
2. Create a Trust
Trusts are powerful legal vehicles for protecting assets from taxes and providing inheritances according to your wishes, yet they’re complex legal entities requiring expert guidance in their implementation and operation for optimal use in an estate plan. As they’re vital parts of an overall estate strategy plan, it is critical that trust professionals help shape an estate plan effectively.
Schwab professionals can assist in selecting which assets to put into a trust, including cash, real estate, investments and business interests. They also assist in selecting trustees and beneficiaries.
3. Create a Living Will
SmartAsset can connect you with trusted financial advisors near your area to assist in understanding how an inheritance fits into your overall picture.
Your windfall could also help pay down high-interest debt or boost retirement savings – just be mindful not to make decisions hastily that could have long-term repercussions! Here are a few key points.
4. Make a Will Update
Maintaining an updated estate plan is important, from updating beneficiaries, executors, guardians and assets lists to documenting intellectual property or trademarks.
After major life events and every few years, it is advisable to update your Will. Doing this does not need to be complex or costly.
5. Create a Power of Attorney
A Power of Attorney (POA) is a legal document that grants someone else authority over your finances. Before choosing someone as your POA, be sure they can be trusted – consult a financial advisor or tax professional first before making your choice.
An inheritance should always be saved away for emergency purposes and, if applicable, be allocated towards paying down high-interest debts or expenses that help save in the long run.
6. Create a Health Care Power of Attorney
Estate planning may seem complex and daunting, but everyone can benefit from making sure their assets are managed according to their wishes after death. By employing these simple strategies you can protect your wealth for future generations after your passing.
An effective health care power of attorney enables you to appoint someone you trust with medical decisions in the event that you become incapacitated, should that occur. Keep it with other estate planning documents in a secure location like your home, safety deposit box, or lawyer’s office for maximum effectiveness.
7. Create a Living Will Update
As life changes, it is crucial that your estate plan stays up-to-date. Establishing living wills, healthcare powers of attorney and other advance directives is an effective way of making sure your healthcare wishes are honored.
Review beneficiaries on insurance and retirement savings accounts, since beneficiary designations usually override directions provided in wills. Furthermore, store your living will in a home safe and provide copies to healthcare providers and family members as part of your plans for caregiving.
8. Create a Health Care Power of Attorney
When receiving an inheritance, you may have immediate goals like purchasing a home or vacationing abroad; but also need to think long-term about financial security goals such as building up savings.
An health care power of attorney allows someone else to make medical decisions for you in case of illness or incapacity, making estate planning simpler. With FindLaw’s DIY forms, this document and other powers of attorney documents can easily be added into your estate plan.
9. Create a Living Will Update
A living will is a document designed to enable you to express your end-of-life healthcare preferences, and should be written while you remain healthy.
Smart estate planning includes strategies that reduce or eliminate federal and state estate taxes for your beneficiaries, with an experienced adviser being invaluable in understanding and implementing such plans to protect assets during life.
10. Create a Health Care Power of Attorney
Financial experts advise using any inheritance or windfall money for debt reduction. Paying down high-interest credit card, auto loan and mortgage debt will reduce financial stress while helping you reach other long-term goals more easily.
Financial advisors can offer invaluable insights and guidance when it comes to handling an inheritance. You should also seek tax professional’s guidance regarding any decisions related to this new source of income.