You might hear that you need to make an "estate plan," but what does an estate plan cover and how do you make one? Here's a simple list of the most important estate planning steps to consider.
In a will, you state who you want to inherit your property. You also can use a will to name a guardian to care for your young children in case something happens to you and the other parent.
If you hold your property in a living trust, it won't have to go through probate, a time-consuming and expensive process. Plus, a trust gives you more flexibility than a will—especially when deciding how your property should be distributed and managed after you die. Even if you have a trust, you should still consider having a will to handle property that you don't place in the trust.
Writing out your wishes for health care can protect you if you become unable to make medical decisions for yourself. Health care directives include a health care declaration ("living will") and a power of attorney for health care. A living will says what treatment you want to receive. A power of attorney for health care lets you name someone to make medical decisions for you if you can't. (In some states, these documents are combined into one, called an "advance health care directive.")
With a durable power of attorney for finances, you can give a trusted person authority to handle your finances and property if you become incapacitated and unable to handle your own affairs. The person you name to handle your finances is called your agent or attorney-in-fact. Despite the name "attorney-in-fact," this person doesn't need to be an attorney.
You should name an adult to manage any money and property your minor children might inherit from you. This can be—but doesn't have to be—the same person as the personal guardian you name in your will. If you have a living trust, your successor trustee—the person who manages the trust after you die—will manage any trust property you've left for your children.
Naming a beneficiary for bank accounts and retirement plans makes the account automatically "payable on death" to your beneficiary and allows the funds to skip the probate process. Likewise, in almost all states, you can register your stocks, bonds, or brokerage accounts to transfer to your beneficiary upon your death.
If you have young children or own a house, or you might owe significant debts or estate tax when you die, life insurance might be a good idea.
The overwhelming majority of estates won't owe federal estate taxes. For deaths in 2024, the federal government will impose estate tax at your death only if your taxable estate is worth more than $13.61 million. (This exemption amount rises each year to adjust for inflation.) Also, married couples can transfer up to twice the exempt amount tax-free, and all assets left to a spouse (as long as the spouse is a U.S. citizen) or tax-exempt charity are exempt from the tax.
Rather than a funeral prepayment plan, which might be unreliable, you can set up a payable-on-death account at your bank and deposit funds into it to pay for your funeral and related expenses.
Make your end-of-life wishes known regarding organ and body donation and disposition of your body—burial or cremation.
If you're the sole owner of a business, you should have a succession plan. If you own a business with others, you should have a buyout agreement.
Your attorney-in-fact and/or your executor (the person you choose in your will to administer your property after you die) might need access to the following documents:
Keeping your documents organized will be a great help to your survivors.
You can create a complete estate plan, quickly and easily, with WillMaker & Trust.
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