Estate planning is very vital and therefore you must know certain basic tips about it to make the most of it. To really achieve success in your estate planning, below are some important things you need to know. The information provided shortly also tells you the necessity of a will and how you can assign a power of attorney.
- Irrespective of your net worth, you should put up a basic estate plan
Putting up a basic estate plan is a sure way to achieve your family and financial goals after you die.
- Estate plans are multipartite
There are several elements involved in an estate plan. These elements may include a will, a living will or health-care proxy also known as medical power of attorney and assignment of power of attorney. A trust may also be relevant for some people. It is important to keep bother federal and state laws to minds when putting up an estate plan.
- You should begin by taking inventory of your assets
Elements included in your assets are retirement savings, investments, insurance policies and real estates. You need to ascertain who will inherit your assets and who will handle your finances in case you are no longer there or not capable to do them. You also need to determine the person that would be making medical decisions for you in case you are no longer able to make them by yourself.
- Everybody needs a will
A will is an indication to the world showing them where exactly you want your assets to be when you die. This is essentially where you should state the guardians for your children. When you die without a will, you may probably cause chaos among your heirs and will not be able to decide who your assets should go to. A will is also relevant even if you have a trust. The will covers areas in which the trust does not cover.
- Trusts are not designed for the wealthy
Trusts are designed to enable you in conditioning your assets and also stating how and when they should be distributed after your death. With trusts, you will be able to cut down your estate and gift taxes. Also, you will be able to distribute your assets to the right people without the administration of probate court. More so, trusts can even go a long way in protecting your assets the more from lawsuits and creditors.
- To prevent disputes and confusion among your heirs, it is better you discuss your estate plans with them.
The issues surrounding inheritance can really cause lots of confusions and disputes. However, you can avoid the disputes and confusions that would have arisen in the process by being very clear about your aims and intensions.
- The amount you are allowed to leave to your heirs free of federal tax according to the federal estate tax exemption has been set permanently at $5 million indexed for inflation
Estates under $5.25 million were exempted from tax in 2013. Up to 40 percent taxes are placed on amounts that are above this.
- You can leave any amount of money to your spouse without any tax but this is not usually the best way to go
Tax exemption can be a very handy tool. However, when you leave all your assets to your spouse, you are not using the tax exemption but rather the taxable estate of your surviving spouse increases. In case your surviving spouse leaves money for your children when he or she dies, they will pay more estate taxes. More so, the difficult-to-make decision as regards the distribution of your assets is delayed till your spouse’s death.