Planning for the end of your life just as you are about to begin your new life together probably doesn’t seem quite as enticing as packing the bags for your honeymoon, but it is something that needs to be considered. Most of us would do everything in our power to help protect our loved ones, and by preparing estate documents you will allow your family to be protected from the unexpected. Whether you are about to get married, have been married for 50 years, or never have plans to do so, it is important for everyone to have estate documents in place.
As time passes, creating an estate plan will only become more complicated as both your family and your assets grow. By starting your estate plan today, you will lay a groundwork that can be updated as you go through life.
So what are some things you need to do?
Create or update your Will
This is often considered the first step in estate planning as it outlines many things that you wish to happen at the time of your passing. It is important to discuss with your partner how you want your assets to be split up should something happen to one or both of you.
At this time you will also decide who you want to designate someone as the executor of your will – the person in charge of distributing assets and settling debts as you have them outlined in your will. In addition, if you have minor children, a will allows you to choose their guardian.
It is important to remember that without a will, your estate will be handled by the state, and your assets may be distributed differently than you would have wished. A will also does not dictate how accounts with beneficiary designations will be distributed, so it is important to make sure that both your beneficiary designations and stipulations in your will are in accordance with your wishes.
Beneficiary designations
Throughout your life you will work incredibly hard to build up your assets, so you will want to make sure you designate the proper beneficiary for when you pass. Most retirement plans and investment custodians make it fairly simple to designate your beneficiaries, normally either through your online portal or by submitting a form. You will need to designate your primary beneficiary-the person(s)/organization(s) who will inherit your account, as well as your contingent beneficiary-the person(s)/organization(s) who will inherit your account should your primary beneficiary pass before (or with) you. Keep in mind that beneficiary designations should be updated and revised should you go through life events such as having children or getting divorced.
Furthermore, there are different long-term tax consequences depending on whom you choose as beneficiary, so it is important to work with a financial planner or tax accountant to make the correct decision.
Obtain Power of Attorney
Having someone listed as a power of attorney on your accounts can remove a lot of the stress that comes along when one becomes incapacitated or is unable to take action. By having someone listed as a power of attorney they will be able to make decisions on your behalf-this includes everything from paying your mortgage to making decisions for the business you own. The following are a few examples of the different types of Power of Attorney:
- Durable POA: allows someone to act on your behalf both while you are competent as well as if you were to become incapacitated.
- Springing POA: allows someone to act on your behalf only after you become incapacitated.
- Healthcare POA: allows someone else to make healthcare decisions on your behalf should you become incapacitated.
- Limited POA: gives someone else the power to act on your behalf for very specific situations.
Determining which POA is right for you can be difficult, so just as with all the above documents, seeking the help of a lawyer can help guide you through the process.
Whether you have accumulated a large amount of assets or you are just starting, it is never too early to begin planning your estate. It could save your family many troubles down the road and it will help protect your loved ones, even after death do you part.
Up next: Planning for retirement
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