If you want to protect your assets from excessive taxes and be certain that they are distributed according to your wishes, a simple will simply isn’t enough.
Comprehensive estate planning ensures that your hard work doesn’t end up in the hands of the IRS.
More importantly, your estate plan includes instructions for handling your health-related decisions, in case you have a situation in which you are unable to make your preferences known.
This guide will help you get you started with planning your estate, so you can:
- Protect your life savings
- Transfer your assets to your chosen beneficiaries, and
- Live your final days the way you see fit
Table of Contents
Make A Will vs Estate Planning
Having a will is an important first step in managing your estate, but it is just one part of your comprehensive plan.
Your will offers instructions on how your assets are to be distributed, but your estate plan makes sure the process is smooth and stress-free for your beneficiaries.
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When possible, your estate plan is specifically designed to keep taxes and fees to a minimum, so more of your assets are transferred to your beneficiaries. For example, a skilled estate planner might leverage financial products like trusts to manage gifts to children and grandchildren. Some people even use trusts to make sure beloved pets get the care they need.
In addition to covering the financial aspects of your estate, a comprehensive estate plan includes documents critical to your care at the end of your life. For example, your estate planning professional might work with you on a Power of Attorney to give a trusted friend or relative the ability to make health and financial decisions on your behalf if you are unable to do so.
You may also choose to complete a Living Will, also known as an Advanced Directive, to outline your wishes in certain health-related scenarios.
These documents reduce the burden of making decisions when your loved ones are going through a difficult and emotional time.
The Purpose of Estate Planning
Chances are, you have reliably paid the taxes due on your income year after year. Unfortunately, that doesn’t exempt your assets from estate taxes.
Estate tax regulations apply on top of other taxes and fees. They are assessed in addition to probate fees, generation-skipping taxes, and other charges your estate might incur.
One of the biggest issues that your loved ones could face comes from the fact that estate taxes are assessed on all of your assets after your death.
The total includes the value of real estate and businesses. The full tax payment is due within nine months of your death, even if you aren’t leaving cash to your heirs.
If you don’t account for this situation with an estate plan, your beneficiaries may be forced to sell your assets. In some cases, that means letting go of family homes and businesses to cover the final estate tax bill.
Fortunately, there is good news when it comes to estate planning. You may not have to worry about large tax bills if you are married. Assets left to your spouse are exempt from estate taxes.
Better still, assets under a certain threshold can be passed to any of your beneficiaries tax-free. The threshold is reviewed annually and subject to change, but for 2019 it stands at $11.4 million per individual – an increase from $11.18 million in 2018.
Assets in excess of the threshold can be taxed at surprisingly high rates if left unprotected – perhaps as high as 40 percent of their net value. That doesn’t include death or inheritance taxes assessed by individual states. Clearly, estate planning is an important move to ensure the financial security of your beneficiaries.
Of course, minimizing taxes is just part of your comprehensive plan. Your financial services professional will work with you on a variety of other essentials, such as instructions for your end-of-life care.
Deciding now makes it easier for your loved ones as you approach your final days.
What Documents are Needed for Estate Planning?
Keeping up with constant changes in estate-related regulations is a full-time job for financial services professionals.
It isn’t practical to try and manage all of these details yourself. Work with an estate planning expert, and be prepared to review the following aspects of your situation:
The Value of Your Estate
After your death, an appraiser will be responsible for determining the fair market value of your assets.
This report will be used to calculate the total value of your estate and subsequent tax liability. However, you can provide your estate planner with enough information to make informed estimates by documenting each of your current assets.
Include any paperwork related to the purchase or current value of items like real estate, business interest, cash, securities, insurance, trusts, and annuities.
If applicable, provide details on other assets that have intrinsic value, such as fine jewelry, antique furniture, and artworks.
Your estate planner will also need a clear understanding of your liabilities, as some of your debts and expenses will be deducted from the total value of your estate. Collect documentation related to mortgages, charitable contributions, and similar before you meet with your financial services professional.
With this information, your estate planning expert will be able to recommend the best possible solutions for transferring your assets to your beneficiaries.
Your Family, Your Beneficiaries, and Your Decision-Makers
You don’t have to know exactly how you want to distribute your assets when begin the estate planning process.
However, it is helpful to have certain details available, like the names, ages, and contact information for your family members and other potential beneficiaries.
This information helps your estate planner recommend appropriate products to protect your assets and to get them to your beneficiaries intact.
You should also begin thinking about who you can rely on to make decisions for you if you are no longer able.
- Who do you trust with your medical care?
- Who do you trust to manage urgent financial matters?
Keep in mind that your first choice may not be willing or able when the time comes, so you should always include a second option in your estate documents.
How To Get Started with Estate Planning
If you already have your financial documents in one place, you are ahead of the game. However, even if you don’t, there is no reason to put off planning your estate.
Today’s estate planning professionals are leveraging advanced technology to make the process simple and efficient. For example, Gentreo offers an online platform that guides you through estate planning step-by-step for a fraction of what you would pay to a traditional financial advisor.
The Gentreo service offers a comprehensive suite of state-specific estate-planning documents that carry the same legal weight as documents you complete in an attorney’s office.
Through this site, you can complete your Health Care Proxy, Power of Attorney, and Will.
In addition, you can make use of Gentreo’s digital vault to store critical estate-related documents, and you can take advantage of the site’s unique Emergency Card program in case you find yourself in need of medical care unexpectedly.
Gentreo is a great way to get started with estate planning. You can get all of the basics covered, so that your assets are protected for your beneficiaries once you have passed.
Learn more about Gentreo at Gentreo.com.