Estate Planning

Estate Planning

At the start please note that the information in this article provides ideas and should not be considered as professional advice. Consult with your financial and legal licensed professionals for discussions on your specific situation.

As possessions and wealth accumulate, everyone needs to make sure they give those assets to the people they want to receive them, at the right time, and with the least burden. If we believe that we do not have to do anything and everything will work out when we pass away, then our heirs will be in for many difficult issues. If we do not have a will, then the state in which we live will determine who will receive our assets, and when they will receive them. So at the very least everyone should have a will created by a good attorney who can ensure that the document will meet the legal criteria needed to distribute things as desired after death. The attorney should also establish the power of attorney so if there is a medical issue that renders decision making unreliable, or impossible, a trusted individual is already legally in place to help.

Another thing to consider in estate planning is how a person can best provide for the ones they love after that person is gone. A good financial planner is someone to build an ongoing relationship with. The financial planner can provide informed advice and help on some of the best options for each specific situation. One vehicle to consider for helping heirs is life insurance. There are many providers of life insurance and one should look at the company ratings from a reputable source since the policy will be a long-term investment. Another consideration for life insurance is whether to purchase a whole life policy, or a term life policy. A whole life policy guarantees coverage, stable premiums and cash value that may be borrowed from if desired. It typically will require more investment for higher coverage amounts though. Term life insurance provides lower premiums for the term, and typically can make purchasing a higher benefit amount of coverage more affordable than whole life insurance depending on age and health when taking out the policy.

Stocks and bonds are also investment vehicles to consider buying. Although stocks do not have guarantees like life insurance, they can be a smart way to build wealth which may provide multi-generational benefits. Purchasing stocks through 401K plans, or similar types of plans allow the investor to defer taxes and often include a company match. If money left in a 401K plan is not used in retirement, it will be available for the designated beneficiaries.

Investing in something that provides recurring revenue without regular work involvement is also an idea to structure an estate for the long term. Rental properties and other opportunities are things to consider if someone else can properly manage them.

An additional thing to consider is setting up a trust. There are many trust options out there so working with a financial advisor, an attorney and a good CPA to help make the best decision is wise. Mentioning a CPA… this is a key person in the financial planning matrix. A knowledgeable CPA can help maximize the benefits of an estate while legally minimizing the tax burden. Consider looking for a good CPA starting in May after tax season is over if needed.

There are other factors in estate planning and each situation may offer different options. So starting, or updating the plan now is a good way to ensure your family will have the resources they need at the time they need them.