In your will, you name an executor who will have the power and responsibility to pay your debts and distribute the rest of your estate according to your wishes. Retirement plans, such as 401 (k) workplace plans and individual retirement accounts, are also important components of estate planning. But before you can begin to make decisions about these matters, it is essential to take the first step: creating a vision of your future. When it comes to estate planning, many people think they don't have enough assets to make it worthwhile.
However, it is important to remember that your wealth includes everything you own. You may be surprised at how many assets you have when you take the time to make an inventory of them. This should include both tangible items such as real estate and intangible items such as savings accounts. Once you have a list of all your belongings, you'll need to estimate their value.
This can be done through recent home appraisals and financial account statements. The next step is to find and hire a qualified estate planning attorney to help you create your estate plan. Your wealth represents everything you have earned and saved over the course of your life, so whatever its size, it's worth spending time planning what will happen to it. Make sure that all elements of your estate plan, including your last will and testament, living trust, and living will, are valid and legal. You may also want to consider getting life insurance if you anticipate that your estate will have to pay a large amount of debts or estate taxes. Donations can also reduce the financial size of the estate as they are excluded from taxable inheritance, reducing the estate tax bill. Once you have designed a good disability plan that will keep you and your property away from a court-supervised guardianship or conservatorship, the next step is to create a plan for what happens to your loved ones and your property after you die.
This is done through a legal process known as probate. When a person dies, the custodian of the will must bring the will to the probate court or executor named in the will within 30 days of the testator's death. A list of assets that need to be evaluated during probate includes retirement accounts, bank accounts, stocks and bonds, real estate, jewelry and any other item of value. Creditors usually have a limited amount of time from the date they were notified of the testator's death to file claims against the estate for the money owed to them. As part of drawing up your estate plan, not only will you have to decide what will happen to you and your property if you become disabled and what should happen to your property after you die, but you will also need to decide who should be in charge of carrying out your wishes. Depending on the intentions of the property owner, a trust can take effect during your lifetime (living trust) or after your death (testamentary trust).As a result of these steps, the amount of potential capital gain upon death is also frozen, allowing the estate planner to estimate his potential tax liability upon death and better plan the payment of income taxes.
Estate planning is an essential part of ensuring that your wishes are carried out after you die. The first step in this process is creating an inventory of all your assets and estimating their value. From there, it is important to hire an experienced estate planning attorney who can help create a valid and legal plan for what happens if you become disabled or after you die. Finally, consider getting life insurance or making donations in order to reduce potential tax liabilities.