Many people believe that planning an estate is only for the very wealthy.
The truth is that if you want to consider how your belongings and your resources are dealt with after your demise, then you need to plan your estate.
Before we continue further, let’s deal with some basic things that you will have to do to set up your estate.
One of the first things you should do when planning your estate is take an inventory of your stuff.
Tangible assets
These are things like:
- ⬥homes
- ⬥land
- ⬥other real estate
- ⬥vehicles such as cars, boats, motorcycles, or four-wheelers
- ⬥collectible things like art, wine, antiques, trading cards
- ⬥other personal items that belong to you
Intangible assets
These are things like your:
- ⬥checking and savings accounts
- ⬥certificates of deposit
- ⬥stocks
- ⬥bonds
- ⬥mutual funds
- ⬥life insurance policies
- ⬥ownership in a business
- ⬥health savings accounts
- ⬥retirement plans such as a 401k or pension
Now that you’ve made a list of your tangible and intangible assets it’s time to estimate their value.
In some cases, you’ll want to get outside help with determining value. For example, get an appraisal on your home or any collectibles you own. Retrieve any financial statements from your bank and/or financial advisor.
Once you know the total value of your estate, determine what it will take to protect these assets.
For example, life insurance.
Do you have enough to cover the needs of your family in the event you’re unable to provide for them?
Now it’s time to work out the details.
Estate plan
Estate plans can include:
- ⬥a trust
- ⬥a medical care directive
- ⬥a durable financial power of attorney
- ⬥limited power of attorney
- ⬥your will
The goal of estate planning is to minimize inheritance taxes, however most people are unlikely to have to pay these taxes.
For example, Federally speaking, only very large estates are subject to these taxes; as of 2020 nearly $12 million dollars (for singles) and $23.16 million dollars (for married couples) of an estate is exempt from federal taxation.
Federal estate taxes aren’t the only thing to worry about…check your state to see what it might levy on your estate. Work this figure into your estate plans.
That said, whether or not your estate will be subject to inheritance taxes, an estate plan can minimize the burden on your loved ones. They can grieve without the added hardship of chasing down information to settle the estate.
Guardianship
Name a guardian for your minor children or children with special needs. Even better, have a backup guardian. Document what you want this guardian to do for your children in terms of how you want them raised, any goals you might have for them (e.g. college).
Name your executor(s)
This will be the person(s) who will manage the estate.
If you don’t name an executor, the court will appoint one on your behalf. Keep in mind, however, that if this has to happen, nobody in your family will be able to go inside your home until all permissions have been granted by the executor(s).
It’s common to name one of your children as an executor, particularly if they are smart with money and their siblings trust them to handle your estate well.
Alternatively, you could have a disinterested third party such as an attorney or even your banker handle the matter for you.
A trust
A trust allows you to dictate how individuals receive assets from your estate. One common way trusts are used is for minor children, or children with special needs.
A trust will ensure that your heirs receive what they need in accordance with your wishes.
Important tips:
Check your policies to ensure that the people listed as beneficiaries are the ones you want named. For example, you don’t want your current wife to miss out on any resources after you’re gone just because your ex-wife is beneficiary to an old policy that you forgot to change.
Much of what we do is online…make sure you include a list of passwords and information that your executor will need. Include them with your list of all assets and all accounts.
How the Home Factors into Retirement and Estate Planning for Seniors
