A common misconception is that estate planning is designed for wealthy people who own different assets. You may also think that estate planning is only about finances and designating an heir to your property. Far from that, estate planning accommodates other decisions such as appointing a guardian for your minor children, setting up the power of attorney, funeral arrangements, and organ donation decisions. Here are the different ways you can use to plan your estate.
1. Writing a Will
Will writing is common among Americans above the age of 65 with 50% having up-to-date wills. However, wills should not be viewed as the exhaustive estate planning instrument as many people take it. Your estate planning lawyer will tell you that a will is important as it details your last wishes of how you want your estate to be handled. Nonetheless, the estate planning attorney should also tell you that a valid will doesn’t exempt your estate from probate. The beneficiaries of your will can only access the assets after the probate process is complete. To avoid the lengthy and costly probate process, you should create a trust and transfer your assets into the trust when you’re still alive.
2. Revocable Trust
You want to save your dependents the time and cost of going through the probate process by utilizing an estate planning trust. Estate planning attorneys will help you to legally transfer your assets to a revocable living trust. In a revocable living trust, the assets are transferred to your listed beneficiaries although you still retain control. A revocable trust will help your dependents skip probate, but they may not escape estate taxes, especially if each beneficiary would get more than $5.45 million upon the division of the estate. If your estate isn’t worth that much, your dependents may not pay estate taxes.
3. Irrevocable Trust
On the other hand, an irrevocable trust will save your dependents large sums of money in estate taxes. This should be your go-to plan if you have a large estate. In an irrevocable trust, you transfer all your assets to your beneficiaries without retaining control over the assets. Once you set up an irrevocable trust, you transfer all the control of your assets to the trustees, and this cannot be changed. The assets in an irrevocable trust are immune to the probate process and are not part of the valuation of your estate when you pass on.
4. Appoint a Guardian for Your Minor Children
Guardianship is a crucial part of your estate planning. Not only does it guarantee the welfare of your children if you pass on, but also it safeguards your estate. We all wish to stay long enough to raise our children and grandchildren, but sometimes accidents happen. In the unfortunate event that you or your spouse are deceased when your children are still minors, estate planning allows you to appoint a close relative or friend as the guardian to your children. If you fail to appoint a guardian, the court will take over and appoint one of your relatives as a guardian even though you may not have approved of the choice when alive. You should appoint a guardian that you can trust to take care of your children and also your assets.
5. Setting up Power of Attorney
Estate planning gives you a chance to appoint someone to take charge of your financial and health decisions for you and your dependents should you become incapacitated. You may become incapacitated due to mental illness or a physical accident. Without designating power of attorney, the court will have to administer a conservatorship after a lengthy and costly process.
Regardless of the value of your estate, you should consider estate planning. Estate planning lawyers in Bismarck, ND, will help you to carefully plan for the future of your estate when you’re still alive. This will ensure the continuity of your legacy when you pass on. Even better, your dependents will move on with their lives without infighting or enduring lengthy court processes to get their inheritance.