Everyone agrees that there aren’t very many certainties in life, aside from two: taxes and death. However instead of viewing these two certainties in a negative light, why not instead think of them as opportunities to invest in your future and the future of your family and the next generation to follow?
That’s exactly what estate planning and review, financial management, and retirement plans should be all about. By taking the time to study and learn more about estate planning and review, you are in sense ensuring that part of you lives on forever in the physical world. And the parts of you that will continue living on long after your physical death are what will be helping to support and care for your family!
The subject of financial planning, wealth management for the future, or estate planning and review can be a sensitive subject for many people because they feel as though it’s quite morbid. While that’s understandable, it also doesn’t much sense consider death is a certainty. There’s no avoiding it! For those that are uncomfortable with the subject of estate planning and review, just think of how much easier it will make things for you and your family at the time of your death.
Here are five simple estate planning tips for when you’re ready to take the plunge into estate planning and review!
Decide who gets how much of what
Regardless of the size of your estate, having a will that decides how your financial assets and possessions will be disbursed among your family is crucial! Without one, the law will step in and determine who inherits what. This often leads to family feuds with grudges that can last a lifetime! This is especially painful following the death of a loved one. The best thing to do is to create a living will and discuss these options with your family and loved ones. Keep in mind that’s it’s important to note that your will doesn’t necessarily govern assets that are subject to the terms and conditions of other contracts. Examples of this include tax-deferred retirement accounts and life insurance policies. It’s best to check with these institutions to in order to be sure.
Decide how it will all be spent
Remember that you may have to create a trust for specific expenses if you intend to have some of your assets allocated to pay for certain expenses. A good example of this is setting aside a certain amount of money to help pay for or completely cover college expenses or special needs education for your grandchildren. The trustee of that trust, meaning the person who it has been entrusted to, is legally bound to make sure that those allocated funds are actually used to cover the specific expenses you outlined. Therefore, it’s important to choose a trustee that you know, trust, and are confident in!
Reduce the amount of estate and income taxes
If you think that the beneficiaries you chose may still owe estate and income taxes on the amounts you chose for them to inherit, you may have a good chance of reducing these taxes by taking advantage of tax-efficient strategies. Don’t worry, these strategies are completely and totally legal! For example, you may choose to leave tax free assets such as Roth retirement accounts, life insurance, and even after-tax savings to other beneficiaries.
Plan ahead for a rainy day
The third and last certainty in life is that it’s filled with uncertainty! The only thing you can do is to go with the flow and be as prepared as possible for a rainy day. A good way to do this is to create an advanced medical directive in writing in order to let everyone know exactly what medical treatment you would or wouldn’t want in the event that you become incapacitated and are unable to speak. You should also appoint someone you know and trust, such as a spouse or sibling as your health care power of attorney in order for them to enforce the directive you created.