Estate Planning Basics: Everyone Needs a Plan
Wills and estate planning are not just for rich people. Everyone needs a strategy for what will happen to the financial assets you leave behind, no matter how much or little you have. Try these estate planning basics:
What is an Estate Plan?
The term “estate” is referring to whatever you own that has value – your home, cars, jewelry, investments, etc. When you pass away, those items will be given away, and an estate plan ensures that it happens the way you would want it to by defining what assets you have, how they’re protected, and how they’ll be distributed.
The first, and most important, document you need in your estate plan is a will, so your intentions are clearly stated regarding the disposition of your property. They’re not difficult or expensive to create. The important elements include:
- A designated executor responsible for handling your estate
- Selected guardians for your children or others who need care
- Charitable donations
- Designations about who will receive what property
If you have a legal will in place, you can minimize estate taxes and avoid your estate going into probate, the state’s court system for dividing up property when there is no will in place. Probate is extremely time consuming and can hold up financial assets that your heirs may urgently need, and it also comes with a hefty tax bill.
Trusts are put in place to give someone the responsibility for managing and distributing investments for a beneficiary. Trusts are more involved than wills, and they include options for living trusts, which are effective during your lifetime, and testamentary trusts, which take effect when you die. Living trusts can be revocable, where you have access to the principal while you’re alive, or irrevocable, when the assets are owned by the trust entity. Consult an attorney to choose the right structure for your situation.
Most people don’t have to worry about federal estate tax since it only applies when the estate value is greater than $5.45 million. However, you should know that the U.S. government considers life insurance, pension plans, retirement funds, and other donations and gifts you’ve made as part of the total value of your estate. State taxes will also apply, but the laws vary widely from state to state.
These estate planning basics will help you be sure your wishes are carried out expediently. You’ll have peace of mind, and you can be sure that your loved ones will have some financial stability. If you currently are in need of financial stability, a loan from Cashmax may be the perfect short-term solution.