You may think you don’t really need to look into estate planning if you don’t have millions of dollars. It’s not uncommon for people to associate the word “estate” with being affluent, but these words are not synonymous. An estate simply refers to what you own. Whether you bring home five-figures or seven-figures, estate planning is important. The seven basic suggestions below will get you on the right track to managing your financial future.
Estate Planning To-Dos:
1. Create a Will
If you own anything at all, you should have a will in place. The purpose of a will is to dictate what you want to happen with your assets after you die. It not only makes the management of your estate easier when you die, but can also prevent family arguments over possessions.
To read more about how to create a will and what should be stated in one, take a look at our blog post The Importance of Writing a Will.
2. Select an Estate Administrator
An estate administrator is someone you trust to carry out the wishes in your will. This person may also be referred to as the estate’s executor. This person also typically will arrange for the payments of any debts and expenses. This person can be your spouse, adult child, or even a friend who happens to have a background in law. Being an estate administrator can be quite a big responsibility, so make sure they are up for the task.
3. Do a Physical Items Inventory
Go around the inside and outside of your home and make a list of everything of value (typically worth $100 or more.) Examples of items to list include your house, cars, television sets, power tools, jewelry, and antiques.
4. Do a Non-Physical Items Inventory
Next on the to-do list is to make another list of non-physical assets such as 401(k) plans, bank accounts, life insurance policies, and so forth.
5. Make a Debts List
After your assets are covered, it’s time to make a list of your debts. This list should include credit cards, mortgages, car loans, and any other accounts you owe money on. This will make it much easier on the executor to pay these balances versus waiting for notices in the mail.
6. Give Copies to Your Executor
Once your will is written and lists are complied, signed and dated, make copies for your estate administrator. It’s also wise to give another copy to your spouse or another trusted family member/friend and keep one in a safety deposit box.
7. Review Your Accounts and Policies
It’s always good to occasionally review those accounts and policies that have beneficiary designations. Often times individuals have more than one contract in which a beneficiary is listed. Examples include life insurance policies, retirement accounts such as 401(k)s and IRAs, and annuities. These accounts were likely opened at different times in one’s life and may all feature different beneficiaries. Review these periodically to ensure your beneficiaries are listed correctly.
As you can see, you don’t need to have Donald Trump billions to have a need for estate planning. In the news, it’s common to hear about the chaos that ensues after a celebrity death because the deceased failed to do any estate planning and all their wealth gets tied up in the legal system. If one dies without a legal will, for example, the distribution of their assets is determined by a probate court. This process can take an extremely long time to sort out and it’s likely that individuals may be unhappy with the results.
What you don’t hear in the news is how normal people like you and me also die every day without plans in place and creates both financial and emotional frustration for family members. To avoid potentially messy outcomes, take the time to complete this checklist. You’ll be protecting your property, assets, and loved ones.