Achieve peace of mind regarding your family’s future through proper estate planning and creating a will
Human longevity is increasing, and the average life expectancy in the US is 78.74 years. Although it sounds nice to have a long life, leading a healthy life in the later years is not always assured. A variety of diseases can afflict the elderly population that sometimes has to struggle to move towards the end. Often some old people are so much incapacitated both mentally and physically that it becomes impossible to take care of themselves and manage the assets they own. Above all, life is uncertain, and so is the time of our passing. What happens to the estate left behind is a mayor concern for most people. This is the reason why legal experts strongly recommend creating a will and/or doing proper estate planning so that the wishes of the person can be guaranteed through legal menas.
A will is a legal document created by any person that clearly outlines his or her thoughts and wishes about the way they want to manage their life when they become incapacitated, and it provides directions about estate planning. By drawing a will, you can ensure that your plans about estate inheritance and distribution of wealth work in the way after you pass away. Moreover, proper estate planning ensures that the inheritors of the property do not have a hefty estate tax that can often result in the property losing its attraction.
Clarity about property transfer
It is essential to plan your estate well so that you are clear about the way you want your assets to be handled when you are no longer available to make any decisions on these matters. Unless these measures are in place, in the absence of an estate’s legal owner, the legal inheritors may face a lot of problems and delays to stake their claim over any assets that are not properly accounted for under a will or estate plan. In many cases, assets left without any will or estate plan get entangled in legal issues that take considerable time and money to resolve. This is a more common problem than one would think, and one that has even affected several celebrities from Elvis Presley to Michael Jackson and from Marlon Brando to Prince.
It is always advisable to organize things as long as you are alive and active so that the transition of property and wealth becomes a smooth affair. The will is one of the most important documents that you must create along with some other materials like a living will and power of attorney to take care of your health in your twilight years. To know more about wills and estate planning, keep reading this article.
Transfer of asset becomes easy
The legalities surrounding the transfer of assets may appear easy as long as the present owners are alive. The simple task can become overly complicated if the owner passes away and nobody knows what he or she had wished regarding the transfer of property. The job of transferring property becomes highly confusing and equally complicated. In case the wishes of the deceased owners are well documented in a will, the process of property transfer becomes transparent and smooth. The document clearly states the manner of division of the assets and mentions the names of the persons going to inherit it and in what proportions. By referring to the will, you can do the process of transfer of property in a much shorter time. Although you define your wishes about transferring property in the will, you must be aware of the ways that a property moves to a new owner.
How does any property move to a new owner?
If you know the method of property inheritance, it would be easy to understand whether your current position justifies the creation of a will.
For jointly owned property, like husband and wife being the title holders of the property, upon the death of any one owner the property automatically passes on to the surviving owner. For financial assets, like life insurance policies, retirement benefits and bank deposits, the beneficiaries mentioned in the accounts automatically receive the amounts.
In case neither of the above conditions exists, and there is no will available, the judges of the court have to finalize the property transfer in probate according to state law. It is a lengthy and cumbersome process, and there is no certainty of how long it might take to conclude.
Estate planning is more than property inheritance
Property inheritance is the primary reason for estate planning that comes with many other benefits. Through estate planning, you can address a wide range of tax-related issues from personal taxes to property taxes. You can reduce the current rate of income tax, minimize estate tax and increase the post-tax worth of your investments, insurance and retirement accounts. Estate tax liabilities can erode the value of estate considerably and can be as high as 50 percent that you can avoid by proper estate planning.
Estate planning ensures that creditors will never be able to lay their hands on your assets and if you have a private business, the family will retain control. Through estate planning, you can address the individual needs of family members and determine the guardianship of minors. Estate planning clearly defines the manner of distribution of your wealth and assets upon your death.
Power of attorney for assets and health care
As much it is essential to create a plan that contains directives about the inheritance and sharing of your assets, it is equally important to have a health care proxy or a durable power of attorney together with an advance health care directive. A power of attorney is also a part of your rendering about how you want to manage your assets and health care in the event you become wholly incapacitated. There is a fine line of difference between a will and a power of attorney which is also known as living will.
A will is a testament of your wishes that you want to fulfill after your death for transferring assets but a ‘living will’ contains directives regarding how you want to manage your assets and be treated towards the end of your life when you are unable to take your decisions. You can either appoint an agent who executes your wishes contained in the document or you do not mention anything about the healthcare needs but empower the appointed agent to take decisions on your behalf. The latter forms the crux of a durable power of attorney as the agent decides the kind of health care that is good for you.
Create two separate powers of attorneys, one for asset management and another for health care. The two legal documents, discussed here can help you to remain in control of your assets as well as ensure proper health care as long as you live.
Essential steps to take
To ensure that your family does not have to go through any hardships in establishing their rights and ownership to the assets that you leave behind after you pass away, you must take the following essential steps.
- Arrange in advance – The process of making decisions about allocating your assets is not always easy as it takes time and might need several revisions as you keep thinking and rethinking before considering a final decision. Prepare in advance so that you can make the decisions when you are not pressed against time and have a calm state of mind. Select the arrangement and services that are most appropriate so that the family finds it relieving even when you are not there. If needed, you can pay for it in advance.
- List your assets – Create an asset list so that the agent you trust with the power of handling your assets know very well about what assets he or she has to manage. It would help the agent to use the assets beneficially when you are incapacitated and distribute in the way mentioned in the will.
- Keep a record of your digital assets – Just as you would make a list of your physical assets, you should make a similar list of your digital assets. That would make it easy for those you entrust with managing the assets as they would know about your accounts well. Record all login credentials and offline documentation related to bank, credit card accounts, brokerage and any other sites that you use for making payments and accessing accounts online. Store the information at a secured location along with other estate planning documents. It enables the executor, trustee or designated power of attorney to access the records and carry on their work smoothly.
- Update beneficiary forms – Retirement plans have beneficiaries. There are beneficiaries also on annuities and life insurance that includes a primary beneficiary, usually the spouse and contingent beneficiaries. Keep the record updated so that it contains the latest list of beneficiaries because you might have re-married and need to change the name of the spouse. Since the benefits automatically pass on to the beneficiaries, keeping it updated is very important.
After a person dies, the family members must not be in disarray. To help them navigate through the difficult time, a person can leave a list of friends, advisors and some family members to notify the death. It would help family members to get in touch with the right people so that their wishes are carried out just in the way they want.
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