by Steve Cyr
At its very essence, estate planning is exercising your right to determine who receives your assets and handles your responsibilities after your death or during incapacitation. The objective is to make sure your financial and health care decisions are carried out as you wish and that your beneficiaries receive your assets in the most cost-effective way possible.
Your circumstances and goals are unique, and your plan should be, too. Keep in mind that estate planning is not just for those over 50. Ensuring that those tasked with distributing your assets are equipped to carry out your wishes is important no matter how old you are. And it needn’t be difficult or overly complex.
As you set out to create your plan, you will need to:
Take Inventory: Nothing is more important than knowing what you own, whether it be tangible assets such as your house, furniture, or car, or intangible financial assets such as checking and savings accounts, CDs, retirement accounts, life insurance policies, etc.
Account for Your Family: Once you’ve gotten a handle on your assets, you’ll be able to think about ways to protect them and your family. Do you have life insurance? Is it the right type and amount of coverage? What are your wishes for your children’s care and guardianship? A properly drafted will is the simplest way to make your wishes known and ensure that there is a clear plan for carrying them out in the event of your death.
Set Directives: A good estate plan involves accounting for what might happen before you’re gone. A medical care directive spells out your wishes for care if you’re incapacitated. Similarly, a durable financial power of attorney allows someone of your choosing to manage your financial affairs. You may also choose to limit the powers of your named representative.
Choose Beneficiaries: Investment accounts, retirement accounts, and insurance products require you to designate to whom you wish your assets to go and in what proportion. It’s critical to keep these beneficiary designations current, as they supersede what’s in your will.
Be Aware of Your State’s Laws: Estate planning is almost always viewed as a sort of federal exercise—something we engage in to ensure that we don’t pay too much tax at the national level. But only very large estates are subject to federal estate tax. By contrast, several states levy taxes on smaller estates and even on those who inherit assets.
Get Professional Help: Generally, it’s worthwhile to consult a good estate attorney. As your estate grows and your situation becomes more complex, this can be invaluable.
Review Your Plan Regularly: Review your plan with some regularity. As your circumstances change—the addition of a new baby, the loss of a loved one, a change in jobs, a spouse’s career transition, a growing inventory of assets—so should your plan. Even if your situation doesn’t change, estate laws do.
Steve Cyr is a financial advisor with First Command Financial Services. Steve is graduate of the United States Military Academy at West Point with a Bachelor of Science degree with a concentration on Economics and served eight years in the U.S. Army.