A lot of people without estate plans do not take action because they don’t know where to begin. With this in mind, let’s look at five tips that should provide some insight and motivation.
Focus on Your Family
Estate planning can seem like a somber responsibility that is easy to put off, and the years of inaction can start to add up. You may know that you should put a plan in place, but it is easy to convince yourself that there is time to do it later.
Indeed, you may live a long and full life that offers you time to take care of it when you are old and gray. However, you never know what the future holds. You probably feel as though you would do anything for your loved ones, so why is estate planning an exception?
When you have a family that is relying on your income, you should carry sufficient life insurance. If you have minor children, you should nominate a guardian and designate a trustee or custodian that would be empowered to manage their inheritance if necessary.
The thought of your loved ones being left in a terrible situation should be enough to motivate you to act.
Don’t Use a DIY Will
You may be tempted to embrace a so-called “simple solution” when you have a nagging feeling that you should address a responsibility. There are websites that sell boilerplate wills, and you may be convinced that DIY estate planning is the way to go.
A number of years ago, the highly respected publication Consumer Reports conducted a study to gauge the efficacy of do-it-yourself estate planning. After consulting with three legal professors that examined DIY wills, they advised their readers to avoid these documents.
Estate planning involves the eventual transfer of everything that you have accumulated to the people you love the most. This is a profound endeavor, and it should not be taken lightly. We have seen too many instances where people did DIY planning to check estate planning off their to-do list, only to leave their family with an expensive and time-consuming probate or to have assets pass to the wrong people because beneficiary designations weren’t updated or property wasn’t titled properly.
Consider a Living Trust
The revocable living trust is an estate planning device that is ideal for the widest range of people, and it is a great alternative to a simple will for those California residents who own real property or have assets that total over $184,500. When you have a living trust, you will act as the trustee while you are living, so you retain control of and access to the assets.
In the trust declaration, you name a successor trustee to administer the trust upon your death, and your heirs would be the beneficiaries at that time.
You can include spendthrift protections if you have concerns about the money-management capabilities of the beneficiaries. The assets would be protected from their creditors, a divorcing spouse and lawsuits. You could also facilitate limited incremental distributions to curtail their spending ability.
Distributions from a living trust would not be subject to probate, which is a time-consuming and costly process that will unfold if you use a simple will. This alone makes a living trust more effective than a will, and the other benefits seal the deal.
Address Incapacity
Aside from the financial part of the equation, you should assure that you have planned for incapacity with regard to health care and end-of-life decisions.
In California, a health care power of attorney allows you to name individuals to make health care decisions should you become unable. It also allows you to state your preferences with regard to what type of care you want, end of life decisions, organ donation, and direct disposition of your remains. You should add a HIPAA release to give your doctors the freedom to discuss your condition with your health care agent.
If you have a living trust, you can name a disability trustee to assume the role in the event of your incapacity. To account for the management of assets that are not held by a trust, you can empower an agent to act on your behalf in a durable property power of attorney.
Attend a Free Seminar!
We regularly offer seminars that cover important estate planning and elder care topics of interest. There is no charge to attend the sessions, so we encourage you to take advantage of these fantastic learning opportunities. To learn more, visit our public seminars page.
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