When most people hear the term “estate planning” they usually think of the rich and famous. The truth is, no matter who you are, you have an estate. Your estate comprises everything you own. It can be as simple as naming the beneficiary of your IRA and personal property, or as complicated as having multiple trusts for children and charities.
You probably want to determine who will benefit from your estate. When someone dies without an estate plan, his or her property passes to heirs by “intestate succession.” In other words, state law takes over and a will is made for you. One you might not like.
Here are some tips for Estate Planning 101:
Wills & Trusts
A will contains your instructions, but it does not avoid probate. Probate primarily has two functions. It pays off your debts and transfers assets to beneficiaries. Since a will still involves probate many estate planning attorneys recommend a trust. Though a little more expensive, a trust takes the state out of the equation. Your assets are held in the trust and are distributed by a trustee of your choosing.
These elements help determine how your assets will be distributed, what happens if you become incapacitated and who is responsible for seeing that your wishes are fulfilled.
One of the many benefits of estate planning? It forces you to organize your records and update your beneficiaries.
Births, deaths, marriages and divorce are reasons to regularly review your estate plan and beneficiary designations. Estate planning also helps avoid conflict within a family after you pass. It’s a sad fact that many families have been torn apart fighting over an estate.
Talk About It
The first big step in the process is a conversation with family members. While this takes courage, it can help avoid surprises, lead to better financial planning and promote family harmony. Again, an estate plan isn’t just for the wealthy. If you have assets, no matter how modest, an estate plan makes sense.