If you die intestate – that is, without leaving a legally binding will – your survivors will have to bear the complicated burden of distributing your possessions and other valuables in the event of incapacitation or death. Proper estate planning is crucial, regardless of your assets’ value.
Why is it a big deal? Documenting a will and accounting for every asset you own, plus listing out your desires, will enhance the plan’s smooth execution upon your death. Documenting lists (and communicating their locations to your executor) will ensure nothing valuable is left out. And indicating your beneficiaries on retirement accounts and setting up the transfer on death designations on other accounts ensures they don’t pass under the will.
Estate planning is more than just drafting a quick will – it takes thoughtful planning, including itemizing your assets, taking care of debts, and much more. Here are 11 tips we have to get you started:
1. Itemize your Inventory
Take time to list all your tangible and intangible assets and estimate their values. You’ll be surprised that you have more than you thought.
Your tangible possessions include anything you can see and touch: real estate (like land, home, and buildings), vehicles, collectibles, electronics, furniture, and other personal assets.
Intangible possessions include life insurance policies, business ownership, savings accounts, retirement plans, mutual funds, stocks, bonds, and bank accounts.
2. Take Care of your Debts
Do you have open credit cards, mortgage loans, car loans, and other debts? List all these debts down, remembering to add the creditors’ contact details, location of agreements, and account details.
You can also list life, vehicle, disability, and homeowners insurance. That way, most of your debts will be cleared in the event of disability or death.
3. Draft a Will
Once you hit 18, be sure to draft a will to act as a rulebook for your possessions’ distribution. You don’t want unnecessary fights amongst your heirs. The will should outline information, instructions and designations like:
- Beneficiaries’ names: both children and other relatives
- Executor’s and back-up executor’s names: they’ll ensure the will is adhered to
- The guardian of your dependents and minor children.
- How sentimental personal items should be distributed
- The person that will take care of the pets
Sign it in the presence of two witnesses who are not related. These two should also append their signatures to the document. And remember to make the will’s location known to other relevant people.
4. Consider a Living Trust
If you’re looking to avoid probate, a revocable living trust will come in handy, especially if your estate is large. It allows you to continue controlling your possessions and conducting your affairs privately.
A living trust is a contract between the grantor and trustee to oversee assets on behalf of an inheritor or beneficiary. The trust should contain instructions on who will manage the possessions as a ‘successor trustee’ in the event of incapacitation or death.
An estate plan based on trust allows your possession to remain under your trust long after death or disability. They can then be distributed to one or more new trustees to manage on behalf of the heirs. Also, your spouse can manage the assets without court permission, thus saving time and expenses.
5. Consider the Financial Power of Attorney
This document gives a person you trust the authority to perform financial matters on your behalf. Under this arrangement, you’re the principal, and that person becomes the agent or attorney-in-fact.
As per the wordings in the Power of Attorney (POA) document, it can kick into action immediately or upon your incapacitation or death.
6. Consider a Health Care Power of Attorney
This document authorizes a person you trust to decide your health care needs in the event of physical and mental incapacity. Be sure to discuss healthcare desires with your medical agent.
7. Consider a Living Will (advance directive)
A living will states your desires regarding life-prolonging health care procedures you desire if you get injured or terminally ill and cannot communicate your desires.
This document works in hand with a healthcare power of attorney to guide the agent. It can also set forth your desires if your agent is not available at a crucial moment.
8. Draft a Statement of Desires
While this document is not legally binding, it will guide your executor on identifying and locating your insurance coverages, financial accounts, credit cards, mortgages, and auto loans.
Some of the things to list in this document include your close friends and relatives’ contact details, location of properties, and your desires regarding things like final send-off and organ donation.
9. List all your Memberships
Are you a member of any organization (think college alumni group, the American Legion, a veteran’s association, and AARP)? Draft a list of all these memberships. Some organizations assign free life insurance benefits which may be transferred to your beneficiaries upon an accidental incapacitation or death.
Do you support any charitable entities? List them too and communicate to your beneficiaries. You may want these charities to get donations in your memory.
10. Update your Retirement Accounts’ Beneficiary Selections
Upon your death, accounts containing designated beneficiaries will go to those individuals (regardless of how your will or trust directs their distribution). Your beneficiary selection in these accounts and policies will take precedence.
So, be sure to check with your employer to update beneficiary designation of respective accounts as per your wishes.
11. Assign Transfer on Death (TOD) Designations
Whether you designate your assets in a will or intestate, their distribution will often be based on courts’ instructions (they’ll be probated). This process can demand a lot in terms of time and money.
But most accounts (like bank savings accounts) are unnecessarily probated daily. Do you hold them? You can get in touch with your bank and put in place a TOD designation. That way, your dependents will skip this court procedure.
Contact Our Estate Planning Team
With estate planning, it’s critical to have the right team on your side. McCollum Law is here and ready to help with your estate planning needs. Call us today at 919-861-4120 today for a consultation and to get started with protecting your assets and your family.