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5 Critical estate planning steps every person should take

5 Critical estate planning steps every person should take

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Estate planning is one of the things you know you should do, but it's always the one you keep putting off. It's understandable. Life's full of competing demands, and you're probably busy just living it.

While most people agree that estate planning is a crucial topic, many still find it an uncomfortable process to complete. Nobody wants to discuss the things that may happen at the time of their death. However, estate planning is much more than making funeral pre-arrangements.

Estate planning is a comprehensive process that will help protect you, your lifetime assets, and your loved ones. It involves the creation of documents to distribute your assets upon your death or to handle your affairs if incapacitated and unable to decide for yourself.

In addition, estate planning also includes financial and income protection, tax planning, and asset management. As you can see, most documents are difficult to understand and require professional help. That said, you may visit Willed or any estate planning solutions provider in your area.

Not sure where and how to get started? Read the list below to find out what critical estate planning steps you should take.

1. Inventory your stuff

At first, you may think you don't have much to assess. But once you begin looking around, you might be surprised by all the assets you have-both tangible and intangible. Tangible assets in estate planning may include:

  • Houses, land properties, and other assets in real estate
  • Cars, boats, and other vehicles
  • Rare coins, antiques, priceless artworks, and other collectibles
  • Other personal assets and possessions
  • On the other hand, intangible assets may include:
  • Business ownerships
  • Life insurance policies
  • Health savings accounts
  • Mutual funds, stocks, and bonds
  • Workplace 401(k) plans, individual retirement accounts, and other retirement plans
  • Certificate of deposits, checking, and savings accounts

After the inventory of your tangible and intangible assets, it's time to estimate their worth. For some of your assets, outside valuation techniques such as these may help:

  • Statement of financial accounts
  • Recent home appraisals

If you don't have outside valuations, estimate the worth of your assets according to how you expect your beneficiaries will value them. This may help ensure that all your money and property will be equally distributed among those you love.

2. Account for your family's needs

Once you have a clear understanding of what your assets are, think about the protection and security of your family and your assets at the time of your death. You might need to:

  • Ensure adequate life insurance policies: This is more important if you have children to raise, especially when it comes to tuition fees or those with special needs.
  • Name a backup guardian for your children: This may help prevent expensive and time-consuming family court battles that may wipe out all your estate's assets.
  • Specify what you want for your children: Don't assume that there will be someone to take care of them after you're gone. With this, you'll be able to ensure that your children and their rights will be valued and protected.
5 Critical estate planning steps every person should take

3. Establish your directives

Directives are one of the crucial elements of a complete and well-devised estate plan. These include the following:

  • Trusts: This document transfers the ownership of all your assets to your 'trustee' and dictates the person you trust to manage the assets for your heirs.
  • Durable financial power of attorney: This allows you to name the person you want to manage your financial affairs with while you're still medically unable.
  • Healthcare directive: This includes all the wishes you want to be made when it comes to your health if you're unable to make the decisions for yourself.
  • Last will and testament: This legal device specifies all people who will inherit your assets, including those who will manage them and assist your children if your spouse is also no longer around.

4. Review your beneficiaries

Your last will, as well as other legal devices, may broadcast your wishes. However, they're not all-embracing. This is why it's important to review and reassess all your beneficiaries before making everything final and executory:

  • Check the beneficiaries stated in your insurance policies and retirement plans.
  • Ensure that only the deserving will get your hard-earned assets. You certainly don't want everything to fall into the wrong hands.
  • Avoid leaving the beneficiary section unlabelled. Otherwise, your assets will be distributed based on state laws.

5. Re-evaluate your estate plan

Life is in a constant state of motion, so it's only normal if it undergoes some changes. That said, you might as well make necessary changes and updates to your estate plan. These may involve:

  • Termination of marriage contract due to divorce
  • Death of a loved one who is also one of your beneficiaries
  • Changes regarding state laws that bind your estate plan

Final words

Estate planning is a comprehensive life plan for everyone. You don't need to have a lot of property, be married, or reach your 50s before you start to draft a will and other directives. As much as possible, estate planning should start once a person turns eighteen.

Then, it's up to them to update their plan from time to time. Furthermore, if you need help, don't hesitate to call your lawyer right away and start building a complete estate plan.