If you’ve ever dealt with the death of a close relative, you know that the loss and associated grief process isn’t the only turmoil a loved one’s death causes the family. Battles over wills and inheritances can tear a family apart, and cause money to be lost in the process.
Yet, most people don’t properly plan for what will happen to their wealth when they die. Estate planning is one of the least understood and most ignored areas of personal finance. According to one survey, only 35 percent of Americans have a will. If you haven’t prepared for the future of your assets, read on to see how to start.
1. Organize your financial information. Make a spreadsheet of your assets, debts, and their net values. Gather your deeds and statements together in one place. Tell several members of your family where the documents are. If you are comfortable, go over them with at least one person, perhaps your power of attorney. Once you’ve accomplished this step, you’ll be well on your way.
2. Hire help. Generally speaking, homemade wills aren’t a great idea. To make sure your estate planning documents are legally viable, it’s best to have the advice of a qualified estate planning attorney.
3. Make a will. If you pass away without a will, who gets your estate is up to the state. This costs your family legal fees, time, and can cause strife. If you already have a will, update it every time you go through a major life event (moving, a divorce, etc.)
4. Make a power of attorney. If you ever become mentally or physically unable to handle your estate, who will take over? Appoint a power of attorney to handle your financial affairs in case you ever can’t. This appointment will also help lessen the anxiety your family members will experience.
5. Make a living will. Declare what kind of medical care you’d like to receive at the end. Making your decisions known now can save your family a lot of heartbreak in the future.
6. Learn about probate. Even if you have legal documents in place, they’ll still be subject to probate: the process by which the state validates and executes your wishes. Probate laws vary widely by state, and often are something you can get around with proper planning.
7. Choose an executor or a trustee (if you have a trust). Once you’re gone, you’ll need someone to execute your plans. The person should be someone who you trust implicitly, and whose judgement you respect. If you don’t have a friend or family member who is an obvious choice, it can be a good idea to hire a professional for this job.
8. Explain everything in writing. Someone will need to know how to locate and access your accounts, legal documents, and stashes of cash, and get in touch with your estate planning attorney or other financial advisors. Write all the information down, and give the document to someone you trust. as discussed in step one.
9. Make your wishes known. Much family strife can be avoided if you simply tell everyone concerned what your plans are for your care and estate. This opens the door for you to have many intimate, loving conversations with the people you care about. Not only can you find out what would be meaningful to them, you can tell them what you put in their name.
10. Don’t let your financial situation get in your way. Everyone needs a will, no matter how much money they have. And if you’re concerned about being able to pay for financial services, talk to your attorney. No need to be embarrassed–it’s a discussion they have all the time. Many attorneys offer installment plans, and if yours doesn’t, he can refer you to someone who does, or someone who is in your price range.
There’s no sugar-coating it, estate planning is a time consuming process that can make anyone uncomfortable. Wouldn’t we rather act as if we are going to live forever than face our own mortality? Taking that way out means we miss out on some of the most meaningful moments we will have. So, don’t let the process stop you from making decisions about your future and the future of your wealth. Your family will be very grateful you took the time so they don’t have to.
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