A popular misconception is that estate planning is relevant to only those who own a big house or are very wealthy. Your estate consists of everything you own—your house, bank accounts, investments, retirement plans, and personal property. Any interests that you may have in a business are also included. It is important that you plan your estate early in life because many awkward situations can arise were you to die without leaving behind a legally acceptable will. The division of your property will be done according to the law of your country and the result may not be what you want.
What you should do when planning your estate:
1. Visit an Estate Attorney
It is better to hire a qualified estate planning attorney to help you plan your estate, rather than trying to do it yourself. You may not be able to plan keeping in mind all the relevant laws and this may create difficulties for your family in the future. In the event of an invalid will, the courts will take over and assess your property. Consequently, the division will be done according to the provisions of the law. This will be costly, time-consuming, as well as frustrating for your family. You can spare your grieving family the trouble by ensuring that your estate plan has been worked out with a good lawyer.
2. Keep Your will Clear and Current
Your will should reflect your current family and financial situation. Review your will after a birth, death, marriage, divorce, or if you buy property. If you do not revise your will to accommodate recent changes, it will become invalid. Thus, your estate will not be distributed according to your wishes. This may also cause distress to your family, and deserving family members may be left high and dry. The value of your estate may also be significantly eroded if your family members launch into a legal dispute over your property.
3. Ensure that You Name a Suitable Executor
The executor of your will should be willing and able to carry out the duties entrusted to him. They should have the time and the resources necessary to carry out the appointed tasks. They should also be free from bias toward various family members. If you find that nobody in the family is appropriate for the role, a professional executor may be hired.
4. Assign Power of Attorney
You must be prepared for any eventuality that could render you incapable of taking decisions. The person who has been assigned the power of attorney, known as the agent or the attorney in fact, will take financial decisions and manage investments on your behalf. This person is also your fiduciary and is obligated to act in your best financial interests. There are several types of powers of attorney—durable or enduring power of attorney, healthcare power of attorney, and springing power of attorney. While a durable power of attorney takes effect immediately, a springing power of attorney comes into effect only when the specified circumstances have been fulfilled. Most people choose to assign a springing power of attorney in the event of their becoming incapacitated.
5. Designate a Guardian for Minor Children
If you have small children, you should appoint an able and willing guardian for them who will be able to serve in their best interests. The guardian will be responsible for taking care of their education, their money, and their way of life. You should also appoint a backup in case your chosen person is not able to serve.
6. Work on Estate Planning Early
It is advisable to plan your estate while you still retain mental clarity. If you are unable to take important decisions and you do not have a will, the courts will appoint a guardian for you who may or may not work according to your wishes.
7. Co-operate with Your Lawyer
Provide accurate information and documents to your lawyer whenever required. Documents such as divorce papers, prenuptial agreements, and property-related documents will help your lawyer plan your estate efficiently. Also, it is important that you be honest with your lawyer. If you have an existing plan for a group of beneficiaries, you should let him know about it. Hiding vital information like this from your lawyer could lead to costly legal battles in the future. Your beneficiaries may end up spending far more on attorney’s fees than what they receive from you.
8. Inform Your Heirs
Your family members should be aware of what to expect from you as part of their inheritance. Since this is a sensitive issue, it is good to set expectations in advance so that there are no disputes later.
What you should avoid when planning your estate:
1. Waiting Until You Get “older”
You may be in the pink of health right now but you never know when you could fall ill, or even worse, have an accident. It will benefit your family greatly if you plan early for the future. Procrastination causes much of the suffering in the world; do not add your family’s suffering to it.
2. Inappropriately Leaving Behind an Inheritance
You should think carefully before deciding in what manner to leave behind money to every family member. The money that you give them should help them live a productive life ahead, rather than allowing them to spend it indiscriminately. A good way to leave money to your family is to keep it in a trust fund. In this way, they will receive the money only by the process you have specified in your will.
3. Worrying about the Cost of Estate Planning
You should worry about finding the right estate planning lawyer rather than worrying about how much it will cost you. If you are able to find a lawyer whose personality matches with your needs, it will benefit you in the long run. Even lawyers make mistakes, so it is important that you find a dependable and capable person who understands your requirements.
4. Over Planning Your Estate
Since estate planning is a complicated process, you are likely to become confused and frustrated if you try to plan for everything. Getting a basic estate plan in place is useful rather than fretting over the intricacies of inheritance laws.
5. Letting Your Family Dictate the Terms of Your Will
Do not let your children or your spouse bully you into leaving them an unfair portion of your property. You cannot please everyone and you should not have to since you have the final say in the future of your money.
6. Not Planning for Your Pets
This may seem trivial but designating who will care for your pets can avoid family disputes. It will also ensure that no harm comes to your beloved pets since in the fight for possession, their well-being may be ignored.
7. Not Assigning a Healthcare Power of Attorney
Assigning a healthcare power of attorney will ensure that your healthcare decisions are taken according to your wishes in case of an accident or a terminal illness. If you wish to be taken off life support, you should explicitly mention that in your will.
8. Not Planning for the Succession of Your Business
If you have a family business, you should appoint a successor—be it a family member or a key partner. Planning for the smooth transition of duties and responsibilities will prevent any feuds after your death.
Being aware is key in planning your estate properly. Periodically updating your will to match your current situation will ensure that there are no loose ends. The point of estate planning is to provide for your family after your passing, so doing it right is of the utmost importance.