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

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.

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.

>> What Is a Springing Power of Attorney?

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 Is A Living Trust?

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.

The article Estate Planning for Seniors was originally posted on Investormint

A power of attorney gives another person wide-ranging powers over your financial and medical affairs, but what is a springing power of attorney?

A springing power of attorney is often called a conditional power of attorney. It “springs” into effect only when certain conditions have been met, such as when a person becomes incapacitated.

Both general powers of attorney and healthcare powers of attorney can be made into springing powers of attorney. For example, if you wanted someone to have control only over your medical decisions in the event you became disabled, you could create a springing healthcare power of attorney.

Springing vs Durable Power Of Attorney?

If you are trying to decide what power of attorney is best for you, a springing vs durable power of attorney may leave you scratching your head. Which should you choose?

The primary difference is that a durable power of attorney takes effect immediately after executing legal documents. A springing power of attorney, on the other hand, takes effect only when conditions are met, such as if you became mentally incompetent.

A durable power of attorney might be a good idea for someone who, for example, has been recently diagnosed with dementia, still has their wits about them but expects to become less cognizant over time. They might decide that an adult child can better manage their finances in the future so, while compos mentis, choose to take legal steps to hand over control.

Power of Attorney Rights And Limitations

A power of attorney is not a legal document to be taken lightly by any means. A healthcare power of attorney hands control over medical decisions to another person while a durable power of attorney empowers someone with control over your finances too.

If you have any concern over the financial responsibility or ethical behavior of the person, be very careful and reticent to transfer power to them because they have broad jurisdiction over your bank accounts, brokerage accounts, real estate assets, and most any other assets you own too.

Springing Durable Power Of Attorney Language

Should you decide to create a springing durable power of attorney, be very specific about the definitions and language used.

A very clear legal distinction should be made so the power of attorney only takes effect when certain triggers are met, for example mental incapacitation.

A power of attorney hands over so much control that you should be fully confident you can trust the person to whom you are handing the authority. If you are having second thoughts about a full power of attorney, you could begin by selecting a springing power of attorney.

However, if those niggling thoughts about signing a power of attorney form are because you don’t fully trust the person who will be entrusted with control over your financial and medical affairs, then you may be wise to not proceed period.

CREATE A POWER OF ATTORNEY

Do you have a better understanding of the different types of powers of attorney and how a springing vs durable power of attorney compare? Share your tips about smart estate planning below, we would love to hear from you.

>> What Is A Living Trust?

>> How To Make A Will

>> How To Retire Early

The article What Is A Springing Power Of Attorney? was originally posted on Investormint

A living trust, also known as a revocable trust, is a legal document that facilitates the smooth transition of your assets to your beneficiaries upon death or mental incapacitation.

Along with a will, a living trust forms part of a smart estate planning strategy to sidestep the legal hassles and costs that could otherwise be suffered.

When you care about your privacy, incapacitation, or want to avoid probate, a living trust can help you to achieve your estate planning goals but it does not allow you to reduce your estate taxes and is not a substitute for a will.

Do I Need A Living Trust?

A living trust is valuable when you want to avoid probate, maintain privacy, or are likely to be incapacitated. It is not a useful tool to lower estate taxes.

Whether you need a living trust depends on your financial situation and estate planning goals. In certain circumstances, a living trust can save you time and avoid legal hassles that would otherwise crop up.

AVOID PROBATE WITH A LIVING TRUST

If you own property, a living trust can be especially valuable to avoid probate court hassles.

You can deed your property into your living trust. And because the living trust is revocable, you still have full control over the property assets.

Without a living trust, property that you own is generally subject to a legal process called probate upon your death.

During probate, the executor of your will is instructed by a court to divide your estate among your beneficiaries per your wishes after you will has been authenticated.

Without a will, the probate court divides your property among your beneficiaries as the court sees fit.

If you are in the fortunate position of owning property in more than one state, a living trust is even more valuable. Without the living trust, property held in your personal estate is subject to probate in multiple states.

The legal costs, time and hassle of probate can be avoided by setting up a living trust and deeding your property into it.

CREATE A LIVING TRUST TO MAINTAIN PRIVACY

To avoid snooping neighbors or relatives from seeing what personal assets you are transferring to your beneficiaries, consider setting up a living trust.

Because a living trust makes it possible to sidestep the probate process, your assets can transfer to your beneficiaries privately; the probate process is public so, without a living trust, asset transfers are open to public scrutiny.

Keep in mind, however, that a will is part of the public record. A living trust is not a substitute for a will, but rather the two legal documents are complementary.

SET UP A LIVING TRUST WHEN INCAPACITY IS EXPECTED

Some health conditions lead to a slow deterioration of mental capacity that can be anticipated over time.

If a parent is suffering from the onset of dementia for example, a living trust can form part of an estate planning process that allows for a smoother transition of assets upon death or when legally incapacitated.

The living trust cannot be set up when a person is already mentally incapacitated, so the person must be in compis mentis (in full control of their mind) at the time of signing.

The way it works is that you retitle assets you own into the name of the trust. While you are alive, you act as the (co-)trustee and a successor trustee becomes responsible upon death or when deemed legally incapacitated.

CREATE A LIVING TRUST IF YOU EXPECT YOUR ASSETS TO BE CONTESTED

When you expect someone might contest your assets, you should strongly consider setting up a living trust.

A living trust holds up better than a will when the distribution of assets to beneficiaries is contested.

How To Set Up A Living Trust

A living trust must not only be written but funded. Your living trust is not established by simply creating a legal document. You must also fund the trust by transferring assets to the trust.

A living trust is a more complex legal document than a will. It is not sufficient to simply draft a living trust. You must “fund” the trust by transferring assets, including:

• Bank accounts
• Brokerage accounts
• Any stocks, bonds, mutual funds, index funds, and certificates of deposit
• Personal property
• Retirement accounts, such as 401(k), IRA and Roth IRA accounts

You may also need to transfer the beneficiary name to the trust on any life insurance policies.

If you acquire any assets after setting up your living trust, and want to ensure they are automatically transferred to the trust also, you can set up a “pour-over will” that covers any assets which might otherwise have been inadvertently excluded.

Is A Living Trust Right For You?

Younger individuals and couples with no children and few assets may not necessarily benefit from a living trust.

As a general rule of thumb, if you fall into any of the following categories, you probably do not need a living trust:

• Young married couples with no children
• Young married couples or individuals with few assets

Living trusts are somewhat costly to set up and it takes a considerable amount of time to establish, maintain and modify them.

If you are young and have acquired a high net worth, or you own a successful business, you may want to set up a living trust earlier than most in order to provide for the smooth transfer of your assets, even if the chances of dying anytime soon are slim.

Does A Living Trust Lower Taxes?

If your estate value is greater than the Federal threshold, you will be obligated to pay estate taxes to Uncle Sam. You should look at your state estate tax threshold to see whether state taxes need to be paid also.

Tax savings are generally possible when you set up an irrevocable trust or bypass trust (though you should consult a tax attorney to explore your individual financial situation).

Because a living trust is a revocable trust, the assets of the trust remain in your estate and so it is not an efficient legal means of reducing your estate’s tax burden.

Federal taxes of 40% are applied to estates worth over $5,490,000 in 2017, otherwise a tax exemption applies. When you examine how much the top 1% make, you can see that few Americans fall into this category of wealth so most people enjoy a tax exemption.

Estate and inheritance taxes in certain states often have lower thresholds, so if reducing estate taxes is your top priority then it is best to consult with a tax attorney in your state.

Do I Need A Will
If I Have A Living Trust?

A living trust is complementary to a will not a substitute for it. To ensure none of your assets are inadvertently excluded, a will or a pour-over will is an important part of estate planning.

A living trust is no substitute for a will. Instead, the two are complementary and serve different purposes.

Think of a will as an all-encompassing expression of your wishes and a living trust as a more specific legal document that covers certain assets.

If you happen to inadvertently exclude a specific asset from your living trust, your will can act as a catch-all to ensure your wishes are fulfilled.

What retirement planning tips do you have that you can share? We would love to hear your retirement plans in the comments below.

>> How To Make A Will?

>> Your Retirement Planning For Dummies Guide

>> How Much Does The Top 1% Make?

The article What Is A Living Trust? was originally posted on Investormint

You probably know you need a will – a document that states your final wishes – but you may not realize quite how important and necessary it is or how to make a will to ensure your assets are passed on as you intend.

It is important to write a will to ensure your assets are divided up and allocated to your beneficiaries as you wish. Whether you are young or old, rich or poor, a will ensures your assets are not held up in legal limbo after you die.

If you don’t make a will, your assets could quite easily end up in the hands of family members or beneficiaries you don’t care for much. Without a will, your assets will be divided according to state laws, called intestacy laws. These laws spell out who gets what if no will has been created. To protect your intended beneficiaries from such hassles, the following steps will show you how to make a will.

Creating A Will:
List Of Personal Assets

The first step in creating a will is to create a personal balance sheet with a list of your personal assets, both tangible assets and intangible assets.

When you are creating a will, the first step is to gather a list of personal assets. This asset list includes everything from the home you may own to the pocket watch you might have inherited from your great-grandfather, and everything in between. Generally, your assets will fall into two categories: tangible assets and intangible assets. To make sure you don’t miss anything as you build your list of personal assets, create a checklist to account for everything you own, including:

After you have taken stock of what you own, the next step is to assign a value to each of the items. Calculating how much your intangibles are worth is easy – simply look at your account balance statements. For your tangible assets, such as your home, an outside appraisal may be needed.

Who Gets What

A will allows you bequeath assets to your loved ones as you intend. Pay heed if you have joint bank accounts, or family members listed on life insurance policies or retirement plan accounts because these take priority over the wishes expressed in your will.

After you have accounted for your assets, the next step is to figure out who gets what. It is not quite as simple as assigning certain assets to certain people in your will. If you have a joint bank account with a spouse or a child, for example, those beneficiary designations take priority over how you allocated who gets what in your will. So, if your children are fully grown yet still listed on bank accounts that you intend your spouse to receive in full, consider removing their names on the accounts so your assets are divided up as you wish.

When you are deciding who gets what, you may wish to include your family members in the process. Some family members may have a special attachment to say an heirloom you plan to pass on while another may have no interest in it. By inviting your family members to share their preferences, you can better assign your assets to the beneficiaries who value them most.

How To Write A Will

If you are unsure how to write a will, it is best to hire an attorney, especially if you foresee any unusual circumstances after death, such as a family member challenging your will. However, you are not legally required to hire a legal professional – you can write a will yourself without legal consultation.

A will is a legal document but you don’t necessarily have to hire a lawyer to write your will. You should write the will in clear, unambiguous language. It is generally best to steer clear of emotions or reasoning in your will. For example, you don’t have to explain why one person is being willed an asset over another person.

Some things you may wish to include in your will are:

• The names of executors
• The names of guardians for children and property
• A new trust for children under the age of 18

Although it is not necessary to hire an attorney, it is good practice to ensure your will is in good order, especially if you anticipate any unusual circumstances, such as:

• Family members who may challenge the will
• Controlling tangible assets, such as real estate, after death
• The cost to beneficiaries of estate taxes
• Disinheriting a spouse or child

Who Is The Executor Of A Will?

The executor of a will has responsibilities to pay expenses and debts, as well as to distribute property and assets. The will executor has a big responsibility so make sure a family member selected has the time to carry out the duties of an executor or consider hiring a neutral third-party, such as an attorney or financial institution.

The person(s) you choose as executor of your will can be a family member, a beneficiary or someone unrelated who acts as a neutral third-party, such as an attorney. An executor is granted the power to distribute the deceased person’s property and arrange for the payment of debts and expenses. It is both a powerful role and a time-consuming one, so you should select your executor carefully. It can be a heavy burden on a family member at a difficult time so it is important the executor has the time and capability to carry out their duties.

The benefit of choosing a family member is that they are more likely to carry out their duties pro bono whereas a third-party will charge fees for performing their duties. However, if you suspect that a family member won’t be efficient or responsible in carrying out the duties of an executor then a professional may be the better choice.

How To Pick An Estate Attorney To Make A Will

To make sure your will in good order, hire an estate attorney from a reputable firm, such as LegalZoom, who can walk you through the steps of making a will official. High net worth individuals should also consider hiring an estate attorney, especially if the estate value exceeds thresholds that result in federal estate tax liabilities.

The type of attorney you should select to make a will or act as an estate executor is an estate attorney. To save on costs, it is a good idea to get started writing a will yourself. List your assets and how much they are worth, and put pen to paper to figure out who you want to get what. If you want to make sure everything is in order, you can then consult an estate attorney.

Online legal companies, such as LegalZoom, have estate attorneys who are very familiar with writing wills for clients and charge affordable rates. You can schedule a consultation to discuss your unique financial situation and ensure your assets are divided as you wish among your intended beneficiaries.

High net worth individuals would be especially well advised to consult with an estate attorney. In 2017, the threshold estate value which results in federal estate tax liability is $5.49 million. If your estate value lies above this level, an estate attorney will be especially valuable to help ensure a tax-efficient transfer of assets.

Verify Your Will With A Notary

Verify your will with a notary and make sure at least two witnesses are present when signing your will.

After making a will, it is important to verify it is in good legal standing by signing it in the presence of at least two witnesses. A notary can verify your will also.

Be sure then to let either your beneficiaries or the executor of your will know where you plan to store your will. It is generally advisable to store it somewhere safe, such as a safe deposit box to ensure it is not damaged by say a water leak or some other natural disaster.

After going to the trouble of creating a will, the last thing you want is for the will to be lost or destroyed needlessly due to inclement weather or because it was stored haphazardly.

How To Change Your Will

To change your will, simply update your current will to reflect your new financial changes and make sure at least two witnesses are present when signing.

If a first spouse passed away, and you have re-married or perhaps you have sold a home and bought a new one or acquired more assets or simply opened new bank accounts, it is best to change your will to reflect your financial changes. Changing your will is as simple as updating the original document and having at least two witnesses present when signing the revised will.

By updating your will, your beneficiaries get to avoid any ambiguity during the probate process which might otherwise tie up assets for an extended time period in legal wranglings.

>> Find Out Which Is Better: A 401(k) or an IRA?

>> Discover How To Rollover A 401(k) Into A Roth IRA

>> Who Are The Best IRA Providers?

The article How To Make A Will was originally posted on Investormint