Putting together an estate plan isn’t the most pleasant of tasks. After all, by doing so you’re acknowledging your own eventual demise. In fact, deciding what happens to your assets when you die is often avoided or passed over. According to an AARP survey, three out of five Americans over the age of 50 have a will.
You can save your loved ones a lot of money and frustration by devising a plan for the management of your health care and property if you become severely disabled or pass away. We’ve put together six things you should keep in mind when developing a plan for your estate.
1. No matter what your net worth, it’s important to have an estate plan in place.
Estate planning isn’t only for those individuals who have significant savings and assets. After all, whether you have $20,000 in savings or $1,000,000, you undoubtedly have an opinion about what you want to happen to that money when you are no longer around. That’s what an estate plan can help you achieve!
2. If you don’t do it, the state will do it for you.
If you don’t have an estate plan in place when you pass away, the state will enforce a generic one that it has developed. In other words, if you wish to divide your assets in a certain way it’s up to you to develop those plans.
3. An estate plan has several elements
Estate plans are made up of numerous elements, including a will, assignment of power of attorney and medical power of attorney and often also a trust.
4. Start by taking stock of your assets.
The first step in developing an estate plan is taking a look at all of your assets. These include your investments, retirement savings, insurance policies and real estate or business interests. Once you’ve taken stock of these assets you’ll want to ask yourself three questions:
- Who do you want to inherit your assets? Family members? Charitable organizations?
- Who should handle your financial affairs if you’re ever incapacitated?
- Who do you want making medical decisions for you if you become unable to make them for yourself?
5. Discussing your estate plan with your heirs is a good way to avoid future disputes.
Many people are extremely guarded about their financial matters and are often hesitant to talk about estate planning with their family members. Nonetheless, it’s a good idea to review your plans with your family in advance to avoid any future disputes or misunderstandings.
6. A good way to reduce your estate is to give gifts tax free.
If you wish to reduce your overall estate, a good way to reduce your estate is by gifting it. You are able to gift up to $13,000 a year to an individual, or $26,000 if you’re married and giving the gift with your spouse. Many people like doing this because it gives you the pleasure of helping someone while you are still around and can talk to the person about it.
Putting together an estate plan is a free service at most banks – including MidWestOne. Although it will take a bit of time to pull together an estate plan, it will be well worth the effort.