Despite the unpredictability of last year, 2021 may be the best opportunity to finalize or revise your estate plan. Estate planning involves outlining your wishes for your assets and responsibilities in case of incapacity or death. This plan involves anything you own – your car, your checking account or your home. The ultimate goal in an effective estate plan is to ensure beneficiaries receive assets in a simplified manner that minimizes any estate, gift or income taxes.
Create an Inventory of Your Life and Assets
What does your daily life look like? Who depends on you? Is it your children, your grandchildren, your parents or your pets? If something should happen to you, what is your emergency plan? Create an emergency plan based on your daily life and outlining who depends on you and what they need.
How do you manage your life? What are your passwords and logins for online accounts and online banking? How do you pay bills and manage your household? Who has access to your home in case of an emergency? Create a plan and list with this information so a named individual can manage your affairs seamlessly while you are unable to do so.
Create a list of your assets. These include:
- Homes or land
- Cars, motorcycles or boats
- Checking and savings accounts
- Certificates of Deposit
- Investment accounts
- Retirement accounts
- Life insurance
- Ownership of a business
Establish a Plan
Look at the needs of your family. Your considerations should include protecting assets and providing for your family should something happen to you or your spouse.
Do you have an estate plan? If not, now is the time to draft one. Some considerations include:
- Who to name as your power of attorney, executor or successor trustee?
- Is this the best person to help?
- Do you have the correctly named beneficiaries? Are they still living?
- Do you need to name guardians for any minor children?
- Does your current estate plan take into account any tax changes?
- Will your estate pass in a manner that is tax efficient?
Establish Your Estate Plan
A complete estate plan typically includes a Will, a Durable Power of Attorney, a Healthcare Power of Attorney and, in some situations, a Trust.
Trust – A Trust is a document that exists both during incapacity and upon death. In a Trust, you can designate a Trustee to manage your affairs during a period of incapacity. Upon your death, a Trustee will assist in distributing assets to designated beneficiaries, avoiding the probate process, or holding in Trust for the benefit of minor beneficiaries.
Will – A Will is a document that operates upon death. It names beneficiaries for your assets. For a Will to operate, a probate estate must be opened and the court must appoint your Executor.
Durable Power of Attorney – A Durable Power of Attorney allows a named individual, or agent, to manage your financial and business affairs if you are unable to do so. Your agent can act on your behalf to pay bills and taxes, as well as manage your financial accounts.
Healthcare Power of Attorney – A Healthcare Power of Attorney allows a named individual, or agent, to act on your behalf to make medical decisions if you are unable to do so. This, along with your living will, communicates your wishes for medical care if you cannot make those decisions yourself.
Another consideration is to think about where you keep your important papers and estate planning documents. Make sure it is a place that family and friends can find if they need to access your key documents.
Review Your Estate Planning for 2021
Finally, it is important to review your plan with your estate planning attorney to ensure your beneficiary designations align with your overall estate plan. It is key to review your plan every five years or when you have a major life change, such as a marriage, birth of a child, divorce or death. Tax law changes may also impact your need to make changes or consider using a trust to maximize your exemption.
I am an advocate for advanced planning. It is important to move your estate planning to the top of your list in 2021. A solid plan makes transitioning care and responsibilities during emergencies much more seamless and manageable. It also saves time and money for your family. It may also be the best opportunity for you to take advantage of the high tax exemption.
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