If you do not already have an estate plan in place, it’s time to get started. Don’t worry, it is not difficult. You just need to get all of your ducks in a row and make some key decisions. The main purpose of an estate plan is to explain in writing what you’d like to be done with all of your assets after you pass on.
1. Determine your net worth
The first step in creating an estate plan is to find out where you stand. You will need to gather all pertinent paperwork having to do with insurance policies, investments, loan documents, other liabilities (such as credit cards), and retirement accounts. Hand all of these in to your estate planning attorney so that he or she can determine your tax obligations and your overall net worth.
2. Set clear objectives
Once you determine how much your estate will be worth (in approximate terms, since it will likely change over time), then you are ready to make some key decisions. In this step, be clear about what it is that you want to see happen after you go. Do you have minor children who need a designated guardian? Is there property that you want to transfer to certain members of your family? Do you need to provide for a surviving spouse? Are there children or grandchildren whose education you want to help fund? All of these objectives can be achieved with your estate plan. Make decisions based upon how you want things to happen once you are gone. As soon as you know how your estate should be settled, you can continue to draw out a roadmap of what is to happen.
3. Designate your beneficiaries
This is basically where you explain who gets what in your estate. Typically, the surviving parent will be transferred most or all of the estate, until any minor children are of age to claim their portion. If you are the last surviving guardian, then your kids will probably be your beneficiaries. However, you decide who gets what assets, along with how and when. Some assets may already be designated to a beneficiary, such as an IRA. Other assets may need to be put into a trust until the beneficiary is of an appropriate age. Your estate planning attorney will help you determine the best way to do this. Our job is to ensure that your wishes are carried out after you pass.
4. Choose your fiduciaries
Your estate plan will include an area that allows you to name someone to act on your behalf. You may need to choose several different people to carry out your wishes in different situations. For example, if you become incapacitated, who would you want to act on your behalf to make health decisions? Who would you want acting on your behalf to make financial decisions after you die? These people are called fiduciaries and it is important to choose your fiduciaries wisely. Ask your estate planning attorney how to best choose these people and what each role will demand of them.
5. Notify your fiduciaries now
Once you decide who will act on your behalf in specific situations, you want to let them know as soon as possible. If something was to happen to you, it is best for them to be prepared and to be privy to where you keep important paperwork, who to talk to, and the basics of how you want your estate plan to be carried out. Finalize your estate plan and keep it in a safe place, with copies held by your attorney, your fiduciaries, and your physician.