If you haven’t set up an estate plan yet, there is no time like the present to get started!
Estate planning is the process of planning how your assets will be handled after you pass away or become incapacitated. It typically involves discussing your specific goals with an estate planning attorney who can tailor a strategy for pursuing them, as well as create the legal documents needed to help ensure that the directions you provide are carried out.
An estate plan can be as simple as creating a will and powers of attorney naming people you trust to manage your finances and medical decisions when you can’t manage them yourself. Or your estate plan may also use additional tools to address more complex goals, such as minimizing probate costs and estate taxes, protecting your privacy, or providing for an individual with special needs.
To help you start to think about what you may want your estate plan to accomplish, here are six areas to consider. Of course, these suggestions are general in nature and you may have additional goals that you want to accomplish with your estate plan.
- Help protect your loved ones financially.
One of the primary purposes of an estate plan is to help protect the financial future of your loved ones by providing direction about how you want your money and other assets distributed after you pass away. If you die without a will or making other legal arrangements for your assets, state law will generally dictate who will inherit your estate.
- Name a guardian for your young children.
If you have young children, it’s important to name a guardian who can care for them in case both parents die while the children are still young. You may also want to name an alternate guardian just in case your first choice is not willing or able to be the guardian. The legal document that you use to name a guardian is your will.
- Shield your estate from probate costs and prying eyes.
After death, a will must pass through probate, a court-supervised process that may be costly in some instances and that makes the will part of the public record. You can limit your estate’s exposure to probate by transferring your assets using means that are not subject to probate, such as a revocable living trust and beneficiary designations.
- Name someone to manage your finances.
At some point in your life, you may be too ill or injured to handle routine financial tasks, such as paying your bills. To prepare for that possibility, consider creating a durable power of attorney for finances that names someone you trust to manage your finances for you if you ever become incapacitated.
- Name someone to make your medical decisions.
Who do you want making medical decisions for you if you lose the ability to make them yourself? Have a name in mind? Great! The next step is to grant that person the authority to make those decisions by filling out a health care proxy form, also known as a durable power of attorney for health care.
- Minimize potential estate taxes.
If your estate will be subject to estate taxes, it’s a good idea to plan how to minimize those taxes so that more of your wealth transfers to your loved ones. As of 2023, you can generally give away up to $12.92 million during or after your lifetime without owing any federal estate or gift tax on the transfers. That amount is scheduled to decrease by about half in 2026.
For help creating or updating an estate plan, please consult your TBC Advisor.
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