If the word ‘estate’ brings to mind mansions, private islands and offshore bank accounts, we’d like to encourage you to think about it a little differently.
An estate plan isn’t just for the wealthy. That’s because your estate is anything you own that will be passed down, paid off, or otherwise disposed of upon your death. An estate plan is made up of the official documents that legally ensure your wishes are carried out. While it sounds complicated, creating an estate plan can be relatively simple, and it doesn’t have to be expensive. In fact, the cost to create an effective estate plan can be very reasonable when compared to its savings for your loved ones in terms of time, effort and even money after you’re gone.
True, if your assets are substantial, taxes may be a concern. An effective estate plan can help minimize any taxes due from your estate. But even if you’re young or don’t have a lot of assets, a simple estate plan could head off problems for your family. For example, you can designate a guardian for your minor children, set up a trust to care for them financially, and pass along sentimental items to your loved ones with a few simple documents.
Consider Getting Expert Help
With so much at stake, it’s wise to get expert help with your estate plan. You may be smart and capable, but if your expertise is in a different area, you may not be the best choice to take on this task. Consider John. He’s a university professor who owns a primary residence, a vacation home, and an antique car. He has earned a pension from the university system and has saved for many years in an IRA. John’s life insurance comes through his job, which he has held for 20 years. John is confident that his estate is in order.
Although John was an educated, savvy individual, he did not know the questions to ask to make sure his estate was handled in accordance with his wishes. A short visit and a few hundred dollars could have avoided the problems his family now faces.
While John’s example illustrates some problems that could occur, there are greater consequences if there are minor children involved. Even if someone has verbally agreed to provide guardianship, unless your decision is legally documented, the court may see things differently.
What can you do? Work with a professional to set up an estate plan. An experienced estate attorney can work with you to define your priorities and get everything down — accurately and in accordance with your wishes — in writing.
TYPICALLY, AN ESTATE PLAN INCLUDES:
Will
Your will is the document in which you can name who will care for your minor children or other dependents and directs who will inherit your property. Once the directions in your will are carried out, the document expires.
Trust
You may decide to set up a trust to provide for the ongoing care of your heirs, or the ongoing disposition of your assets. For example, you can set up a trust that will provide an income for your spouse or to care for a disabled child. Unlike your will, a trust is a document that survives even after your will expires.
Health care directives
Depending upon where you live, you may want to consider both a health care declaration and a Power of Attorney for health care. Some states combine these two documents within an advance health care directive. Together, these documents allow someone you choose to carry out your health care decisions, or to make health care decisions for you, in the event that you become unable to do so.
Financial power of attorney
In this document, you give a trusted person or entity the authority to handle your money and property in the event that you are unable to do so.
As you go through your estate tax planning session, you’ll need to consider at least two kinds of taxes: estate taxes and income taxes. Each type is complex, and how your estate is impacted will
depend on the decisions you make today, and those your heirs make after your death. An expert can help you sort it out, preserving your estate to the fullest extent possible.
This material is for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.
This material was prepared by LPL Financial, LLC.
Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL Financial affiliate, please note LPL Financial makes no representation with respect to such entity.
For public use. Member FINRA/SIPC Tracking #637637 Exp. 09/26
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