Estate planning, preparing for the end of life, and making arrangements for your assets and possessions to be handled after your death, can be uncomfortable but it doesn’t have to be difficult.
Here’s what you need to know to make estate planning as simple and straightforward as possible, without leaving anything undone or your descendants in a difficult position of making decisions on your behalf.
Make An Inventory Of Your Assets and Possessions
The first thing you need to do to start an effective estate plan is to create an inventory of your assets and possessions. This is important because you can’t create a comprehensive plan for your estate if you don’t know everything that estate contains.
For instance, if you own a home, it’s a part of your estate. If your home is completely paid off it’s a lot easier to handle. You own it outright, so you can direct that your home be sold or given to a specific inheritor as a part of your estate. But if you’re still paying off a mortgage you’ll need to make a plan to pay off the house or else sell it to get some monetary value out of the home.
These are the kinds of plans you’ll need to make once you’ve inventoried your assets and possessions. It’s important to consider outstanding debts as well, but we’ll cover that more in the next section.
Here are some examples of assets and possessions you should include in your estate inventory:
- Your home, real estate, and any other property
- Antiques and art
- Any other possessions of significant value
- Checking and savings accounts
- Life insurance policies
- Retirement assets
- Business stakes
- Health savings accounts
- Records or evaluations of your property’s value
Once you have a clear inventory of your estate it’s time to start thinking about what you want to happen to that property. But first, you’ll need to check on the big picture of your finances to make sure your plan is reasonable.
Check Your Finances
Checking your finances may be one of the more difficult parts of estate planning, but it’s important. After all, one of the goals of estate planning should be making sure you have the resources your Will and whole estate plan need. Many people also want to make sure they aren’t leaving behind any burdens, or to take care of their final arrangements in advance so their loved ones don’t have to.
Those well-intentioned plans can backfire if you don’t know that you have the resources to execute that plan. Looking at your finances involves checking your existing accounts, retirement benefits, life insurance benefits, stocks and bonds, and other financial assets. You’ll also want to tally any outstanding debts, like car payments, a mortgage, or credit card debt. That will give you a good sense of the costs that need to be taken care of in your estate plan.
Next, you’ll want to consider the financial costs of anything in your estate plan. For instance, what kind of funeral or memorial service would you like, how much will that service cost, and how will it be paid? If you’re setting up a trust, or want to leave certain assets to specific people, where will that money come from and how will it affect the rest of your estate plan?
If you’re not sure how to make a good financial plan, or even what assets and accounts you should consider, a financial planner can help.
Plan for Your Family
Once you’ve got an inventory of the things and assets included in your estate, and of your finances and any costs, it’s time to plan for your family.
If you’re estate planning as a parent of young children, for instance, you should make plans for their guardianship. If you want to set up a trust, or set aside specific money and assets, this is where you’ll do that. Your plan can be updated whenever needed. Some parts of your plan may be naturally time-limited, while others can be manually updated whenever you decide it’s necessary. However, your plans are almost always considered final after you pass.
Create A Will
Your Will is the legal document that outlines your wishes and can be created at any time. Your family plan will go into your will, as will any other directives for your possessions and finances. A living will is an important legal document, so while you can create one on your own it’s usually best to consult with a lawyer to make sure your will is reasonable and enforceable.
Your will can also contain your last wishes and any specific requests you would like to make from family and friends. You’ll be able to name an executor of your estate and handle other administrative details in your living will.
Write Your Directives
Your directives are usually included in your Will, but they aren’t what most people think of when they think of a will. Your directives include naming someone like your durable power of financial attorney, medical power of attorney, and the executor of your Will. If you want to create a trust or any other legal system, you’ll also do that through a directive in your Will.
Work With Your Attorney
A lot of people think that once you have an estate plan your work is done. This isn’t true. Your estate plan and living will should be updated regularly, especially any time you have a significant life change or change in circumstances.
Keeping your will and estate plan on file with an attorney helps make sure the documents are available when they are needed. Your attorney will also be able to advise you on the provisions in your will and may check in with you to see if your will needs to be updated over time.
Your attorney will also be able to guide you to the right paperwork and forms if you need to make major changes to your will without writing a new one.
Ready To Start Your Estate Plan?
We’ve covered the basics of creating an effective estate plan, but we also know that estate planning can become very complicated.
If you’d like help with the details of your estate plan, our Tuscaloosa and Jasper, Alabama law firms can help.