What is estate planning? Many people mistakenly think that estate planning is intended for the wealthy only. Not true. Estate planning is a continuous process that should begin as soon as you have measurable assets. As life goes on and your life goals change, your estate planning and estate trust should reflect your objectives. Without a congruous estate trust, you risk putting undue financial burdens on your benefactors, including estate taxes that can exceed 30 percent of asset value. Understanding your goals helps you identify how to successfully manage your asset base, ensure your wishes are met and that essential estate tax planning is in order.
At a minimum, you should create a last will and testament. But many other tasks should be completed with an estate planning attorney to walk you through the options and keep you abreast of any changes in the laws within your state or at the federal level, namely with the Internal Revenue Service. If your estate tax planning is weak, you won’t get the most out of your wealth. Some common estate planning goals include:
- Creating a last will and testament
- Setting up an estate trust in the names of beneficiaries
- Selecting an executor to supervise the objectives of your will and ensure they are followed
- Adding or removing beneficiaries from 401(k)s, life insurance policies and IRAs
- Making funeral arrangements
- Establishing yearly gifting to reduce estate taxes
- Arranging a durable power of attorney to oversee additional assets and investments
Consequences of Dying Without a Will
If you die without designating your assets base to beneficiaries, the courts of the state you live in can decide for you through a process called intestacy. Your relatives would need to go through the court system to claim ownership of assets, a lengthy, costly and emotionally draining process. If you have no heirs, your property may revert to the state. A basic will can assist you in avoiding court involvement.