What is one of the most appreciated things you can leave your loved ones when you pass? Your vintage car? The business? Heirloom jewelry? No, it’s instructions.
Estate planning allows you to set clear directions on what should happen when you pass. During the estate planning process you get to make the important decisions, leaving nothing for your heirs or the courts to wonder about or argue over. A good estate plan makes it easier and less costly to distribute your assets after you’re gone.
8 Common Misconceptions About Estate Planning:
Many people are confused about the need for an estate plan. Test yourself on these true or false statements:
False. Everyone needs an estate plan, regardless of age.
False. An estate plan covers more than financial assets.
False. Not necessarily. If you pass with no will, it’s called ‘intestate,’ and state law will determine how your assets are divided.
False. An estate plan allows you to name a guardian for your child, along with a conservator, who will manage assets the child will inherit.
False. An estate plan can include medical directives, funeral plans, and other details.
False. The beneficiaries listed on your retirement accounts, life insurance policies and other accounts will rule over anything stated in your will.
False. A will is one part of an estate plan; the will is really focused on who gets what after someone passes.
False. The cost of probate, when a court pays your debts and then divides your property, can take up to 10% of the value of your estate.
What can you include in an estate plan?
An estate plan covers more than financial assets. Here are some of the most common things included in estate plans:
This includes everything you own, including vehicles; your home or other real estate; life and other insurance; jewelry, antiques, or other valuables; savings and checking accounts; stocks, bonds, pensions, and mutual funds; retirement savings; business holdings; and anything else.
This is your total debt, including your mortgage, credit card balances, auto, and other loans.
These are the people, charitable organizations, or others that you want to receive your assets after you pass.
Allows you to designate who should get what when you’re gone. A will also allows you to choose the person (called the executor) who will settle your affairs for you.
Medical Directive/Living Will
Tells people what type of medical care you want if you are unable to make the decision yourself.
Medical Power of Attorney
Allows someone else to make medical decisions on your behalf.
Durable Financial Power of Attorney
Enables someone else to make financial decisions on your behalf.
Allows you to grant part of your estate before you pass. Property left within a trust will not go through probate court.
Funeral and Burial Plans
Helps your family make decisions during a difficult time.
Business Succession Plan
Avoids uncertainty by setting a plan that details exactly what should happen to your business.
Alaska USA does not provide estate planning services, but we do encourage our members to develop a comprehensive estate plan by consulting with a qualified estate attorney and tax professional.
The cost to set up an estate plan depends on what will be included, where you live, and other factors. While you could find some estate planning documents online, a qualified estate planning attorney or tax professional will make sure your plan is solid. They can even help you with some techniques to reduce the inheritance tax that your beneficiaries will have to pay.
Did You Know?
Recent tax law changes almost doubled the transfer tax exemption limit, raising it to $22.8 million per couple / $11.4 million per individual. However, that exemption is expected to return to its former levels of $6 million per individual in 2025. How can you take advantage of this window? This is one example of why you will benefit from the expertise of an estate planning attorney.
A 2019 survey found that 66% of adults age 65+ or older have a will or a living trust. However, that number drops to 39% for people age 45 to 54, 34% for ages 35 to 44, and just 18% for people age 18 to 34.
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