Although estate planning is of major importance, it is frequently one of the most neglected areas. And although it is difficult to think about your own mortality, your estate plan can have a dramatic affect on your finances, your life and the lives of your family and loved ones. If you are young, just starting out, you may be able to avoid this issue for a time, but as the years go by you will find that some estate issues will become more and more urgent.
An estate is everything that someone owns in their own name or with others. Estate planning is the process of anticipating how the future will affect your life and what actions you would like to take to protect your family and loved ones from your incapacity or death.
Generally a comprehensive estate plan consists of a will, powers of attorney, a living will, a health-care power of attorney and depending on your situation a trust to further control the management and distribution of your estate. The decisions you make about managing your estate and how your loved ones will be treated are the central issues of a good estate plan.
If your attitude is "Who cares, I'll be dead anyway…" then your estate plan can be very simple. If you do not create estate planning documents, when you pass away your estate will probated and the probate court will make the decisions (dictated by the laws of the state of your residence) of how your estate will be distributed to your heirs, guardians named for children and essentially the final disposition of all your assets.
If using this "default" estate plan as dictated by the probate court does not appeal to you, then you really should take the time to properly set up the administration, management and final distribution of your estate. Whether you are single, living on your own, just married or ready to retire, you really should pay attention to this important financial planning topic.
| Estate Planning Checklist |
- Who should you name as executor or trustee of your estate and why?
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- Who will be the guardians for your children should something happen to you?
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- How should your estate assets be distributed? Should you include your children, grandchildren and you favorite charity or do you want the surviving spouse to make those decisions?
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- Should your children share equally in your estate or does one have more need than the others?
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- Are your children or other heirs old enough to inherit a large sum of money or should an age restriction be used to control the distribution?
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- What are the costs of administering your estate? Will your intended heirs receive your assets as intended or will administration costs significantly reduce the estate value?
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- What are the tax implications of your estate? Will the IRS receive more than your heirs?
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