Roughly half of Americans don’t have a will, so if you’ve already taken this vital step to protect your assets and successors then you’re already ahead of the curve. While a will is a necessary document that every person should have, it’s still a relatively simple document that probably won’t cover everything you want it to. You may want to consider creating an estate plan that includes a living trust and other important documents like a power of attorney for finances and health care directives.
To over-simplify, an estate plan is a more comprehensive way than a will to instruct how your estate should be distributed when you die. A good estate plan also explains how to manage your assets if you become incapacitated and unable to make financial or health care decisions. Estate plans can save your successors substantial amounts of money in court costs, legal fees, and taxes. Consider the following items when determining if you need more than a will:
Do you have/are you expecting children/grandchildren?
This is one of the most important factors to consider when creating an estate plan. Beyond appointing a guardian to take care of minor children, you may also need to appoint a conservator to manage the assets your successor(s) will inherit once they are no longer a minor.
Minimize probate and maximize privacy
Once you die, a living trust allows your heirs to move through the administration process more efficiently. With only a will, a process called probate must be used at your death. In probate, all of your information, including the terms of your will and the assets you owned becomes public. Probate can also be very expensive and lengthy. An uncontested probate could take longer than a year to pass through probate and court costs start to add up. Constructing an estate plan with an attorney before probate can help avoid most of these costs and loss of privacy.
Consider your digital information
One thing often forgotten, but necessary in today’s digital age, is what happens to your online information after you die. Many of our daily activities are conducted online and this may present issues for your family after you die. For example, if you invest or bank online, it can be an incredible hassle for your heirs to decode your online financial life. Consider storing your passwords in a safe place and giving access to someone you trust through a power of attorney. An estate planning attorney will be able to sit down with you and help you decide which online accounts will need attention in the event of your death or incapacity.
Location and size of your estate
The Tax Cuts and Jobs Act of 2017 doubled the size of the federal estate tax exemption to $11.2 million for a married couple. That means unless your estate is larger than $11.2 million, you may be exempt from paying federal taxes on it. However, depending on where you live you may be subject to state-level estate taxes. There are currently 17 states, and the District of Columbia, that impose some sort of estate or inheritance tax.
When making an estate plan, there are many complicated factors to consider. Working with an estate planning attorney is the best way ensure your estate plan is correct.