In recent posts we have been talking about financial investing and preparing for retirement. All of these investment planning ideas are great. Especially the 10 % investment plan approach and diversification. However every one of us needs to step back. Look at the big picture and consider our estate plan and what that really means. There are lots of issues to consider and we will try to cover a few of them here.
Estate planning takes into account your needs while you are alive. Also your estate needs and also your family’s needs after you are gone. Each of these areas is important to your financial health, to your personal health and of course the health and welfare of your family. Not having an estate plan leaves everyone exposed and possibly experiencing much more personal heart ache . Even financial hardship that is not needed and not necessary.
Without careful planning, without having a will for example, your estate could end up in the courts for months. The only people who get money from your estate are the lawyers and the government. Your family stands to lose a great deal of money to the legal people. The government may even take more taxes than they should because of bad decisions. Meanwhile your family is waiting to receive funds that they may need to live on while the courts fight it out and the lawyers collect their fees. One of the first requirements of an estate plan is to prepare a will and consider the following areas carefully in your plan.
One of the first decisions you will need to think about is who your executor will be. This person or persons will have responsibility for following your instructions with regards to how your assets will be distributed. Note an executor cannot change the will, they must follow the instructions in the will both in who the assets go to, when they are distributed and also finalizing and closing all loans, mortgages and taxes that may still be outstanding. They will also sell assets if needed to pay for these outstanding debts. You can have one executor or several. Obviously it is easier to handle if there is one executor, however for family political reasons or for reasons of financial control you may want to have more than one executor to manage your estate plan.
In order for your executor to do his or her job you must decide and place in your will the direction regarding who your assets will be distributed to and when they will be distributed. Note that your executor will need to ensure that all debts are paid. For example loans, mortgages and especially taxes are paid prior to all of the assets being distributed. This can sometimes be a frustrating issue for many people who are expecting asset distribution. As an executor you have responsibility to close your tax file with the government. Also ensure all taxes have been paid. It is much easier to pay the final taxes from assets that have not been distributed than it is to ask for funds to be returned from your heirs. Your will should be very clear about this element as part of your overall estate plan.
If you have young children and even those who are adults who may still be in school should be considered in your estate plan. One of the things every parent wants to do for their children is provide the best opportunities they can for their kids. Having an estate plan which lays out who will take care of the kids is important. Also who will look after their finances is an extremely important part of the estate plan. Leaving it to someone else or worse the government is one of the worst things you can do. Build this aspect into your estate plan so that your family is well looked after.
You may already have trust accounts, or you may want to set up trust accounts for your young children. Whenever you do this, you will need someone to manage these accounts. Trust accounts are useful in situations where the beneficiary of the trust account is too young or unable to manage their own affairs. You can place the proceeds of your estate in the trust account. Then have a professional manager manage the trust account on their behalf. This is an excellent way of managing the affairs of for your children and beneficiaries who are too young to manage their own.
The last area of your estate planning takes a look at what happens if you are in an accident. Or have a health issue that prevents you from managing your own affairs. Your estate plan creates what is called a living will. Which designates a person who you trust, to manage all of your affairs while you are still alive and unable to manage your own affairs. Not only will they manage your estate as part of a living will. They will also have the responsibility to make decisions concerning your health and treatment that you receive while you are incapacitated. The executor of your living will should be selected with care. They will make decisions on your overall health and well-being, while incapacitated.
One last point. If you decide that you want to contest a will that has been prepared and meets all of the legal requirements, remember that the lawyers involved will charge a significant fee. Before you go to court, ask yourself if the fees that the lawyers will collect are worth what you may eventually receive. Assuming you win the case in court, if not you could end up paying for your own legal fees, plus those of the estate!. It is often said that inn legal contests, only the lawyers ever win. Make sure that your estate plan and will are well thought out. It should be beyond reproach to avoid any future legal action. Which could jeopardize the estate that you want your heirs to inherit.