When you think of the word “estate,” you may have images of huge, sprawling homes, vast amounts of wealth, or a herd of children. If you’re an entrepreneur, contractor, or pretty average office worker, it’s likely that you haven’t even started to think about your estate. But guess what? If you haven’t planned what should happen to your estate in the event of your passing, that means your family will get to decide. At best, this would entail your family having to have a prolonged debate in probate court about your physical and financial assets instead of being able to mourn you in peace – at worse, a family feud. Protect your hard earned money, and protect your loved ones by planning your estate today.
Here’s what you need to know, and a few tips to get it done right:
Understand The Important Pieces That Make Up An Estate Plan
An estate plan, just like any good plan, is comprised of several distinct documents that address specific categories. The main pieces that any good estate plan, and the questions they answer, are:
- Will – Who gets your property? Who gets to mediate any disagreements?
- Trust – Who gets your property after the original beneficiaries have passed? This document also focuses on the legal intricacies that will protect your beneficiaries from losing benefits such as Medicaid after they inherit your property.
- Power of Attorney – Who gets to decide what happens if you’re still alive, but incapacitated?
- Medical Directives – How would you like your medical treatment to proceed, assuming you’re incapacitated?
- Beneficiary Designations – Who gets the rest of your retirement plan, life insurance, and other planned income?
While these are simplifications, each of those answers must be addressed in order to make sure your estate is treated as intended. It’s a good idea to sit down with a lawyer to at least talk through how to write some of these document – ideally you’ll work with them to craft each one.
Take Stock Of What’s Yours
Understanding what’s yours may seem straightforward, but it can quickly become muddled, especially if you’re a co-owner of a business or married.
As you plan your estate, start simple – your income, properties you own, and investments are first. Next, consider your expected life insurance payout, Social Security benefits, and retirement plans such as your 401k and Roth IRAs.
Once your personal property is tallied, consider what you joint own. If you’re a co-owner or stakeholder in a business, this should be fairly straightforward – what percentage is yours? If you’re planning to increase your percentage, consider not only which beneficiary would most benefit from the income, but also which one will be able to maintain the value of the percentage through sound decisions (especially important for businesses).
Lastly, if you’re married, you’ll need to discuss with your spouse, as well as a legal professional, about the fate of your jointly owned property. This can be your home, car, timeshare and more. This can get especially complicated if you’ve been married more than once – do you still have any ownership of investments made in your previous marriage(s)?
Consider Life Insurance
With all that said and done, if you don’t have life insurance yet, it’s wise to do so. While it’s a depressing topic to think about, it’s important: not only does life insurance protect any dependents, but it also will cover the cost of your funeral, and any legal fees tied to your passing.
If you’re in your 20s and 30s, life insurance may very well seem unnecessary – but know that the earlier you enroll in a plan, the less you will spend over your lifetime. Consider it an investment into you family, and a shield against financial instability due to your sudden passing.
It’s never too early to plan your estate – the sooner, the better. Here at ExCapsa, we like to live by the common mantra, “prepare for the worst, hope for the best.” In the case of planning your estate, enrolling in life insurance, and taking stock of your property, getting your affairs in order when it feels unnecessary will save you and those you care about from having to do so while under stress in the future.
