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It might seem a little odd to be talking about estate planning on Valentine's Day. But if the theme of today is true love, then we're of the mind that love is ultimately considerate of the needs of others. For you, the needs you care about could be the needs of your spouse. It could be the needs of your children. It could be the needs of your extended family.
It doesn't matter if you're rich, if you're poor, if you're somewhere in between. The reality of life is that one day, we will all pass away, and one of the most loving and considerate things we can do is to prepare our estate, that is, have a plan ready for the things that belong to us, for after we pass on.
The best thing to do is to revisit your estate plan every 10 years, or so, or if there's a significant life change (you get married, you have a child/another child/grandchild, you inherit money, etc).
Whilst this is nowhere near a comprehensive list, here are 5 things you need to have in your estate plan (or, to consider for your estate plan) to get started.
1. Regardless of how much you have, you need a plan
It doesn't matter how much you have - someone is going to need to take care of your money, your home, your belongings, your accounts, your debts, etc. when you pass away. Not having a will, for example, would leave your next of kin in a terrible position. That is, a position that has no power or control over your things. Regardless of your level of wealth, dictating your final wishes in a will is one of the easiest things you can do to make sure the basics are covered. The basics of a will include very specific details about your wealth; your home, your debts, your retirement account distributions, life insurance, savings, items of significant value, etc. Pro tip: It's best not to use exact dollar amounts as the value of things changes over time.
2. Set up a burial/funeral trust
The last thing you want your family to worry about when they're mourning you is to be concerned about how to pay for your burial expenses, such as basic services, to pay for a casket or cremation, burial plot fees, cemetery charges, etc. Set aside money exclusively for burial costs, as sometimes your assets can be temporarily frozen upon death. You don't want your family to be strapped for funds to pay for things at this time. Your financial planner can help you find the best place to "store" those funds, but most funeral homes or cemeteries can assist you in setting up such an account.
If your financial plan includes long term care when you're elderly, note that some retirement communities require setting up a funeral trust upon entry.
Note that it's very important to revisit your funeral trust every few years to make sure that the value is enough to cover costs as time passes. Additionally, the type of arrangement you make matters (eg: is your trust irrevocable or revocable?).
3. A power of attorney
It's wise to assign someone on your behalf to make financial decisions for you should you be unable to. This is incredibly important because even though you may be unable to make the choices, you should still express in significant detail your wishes in certain situations. Obviously, this is someone you would trust explicitly, but it can also be a professional with no familial relation.
4. An executor
An executor is someone who will be legally responsible for making sure everything is in order after you pass away. They're responsible for distributing your property, notifying agencies of your passing, closing accounts, arranging for payment of taxes, debts and other expenses, plus a myriad of other tasks. Many people choose their close family to be executors of their estate, though you can also choose another type of professional (rules vary state-to-state). In the case of non-family, you'll need to ensure compensation for their duties.
5. A planner to fit your estate plan into the rest of your financial plan
A good financial planner worth his or her salt will never work alone. In fact, the best planner you could find is one that will work with respect towards an attorney (which, of course, you should have when developing your estate plan).
Estate planning is a significant point of our Custom Wealth Inspection. Call us today to set up a first meeting so we can help you take care of your legacy!