Setting up your estate may seem daunting at first. After all, you are planning for the event of your death- plus, estate planning can have plenty of legal and familial factors to concern.
Thankfully, understanding these factors can make planning your estate far less intimidating. No matter what, setting up your estate will always be a time-consuming process; however, it doesn’t have to be scary!
While legal factors may vary, family matters are one of the most vital things you must consider- this includes anything from their needs to their changing personal life.
Let’s take a closer look at some of the most significant factors you must consider when setting up your estate and what they entail.
An Estate Is More Than Just A Will
When you think of your estate, the first thing that comes to mind is likely your will. This legal document is arguably the most common matter in estate planning and has entered the public consciousness.
However, a will is not the only part of an estate! When planning your estate, you should consider other items as well, such as trusts.
Anything left in a will is subject to the probate court, while matters of a trust are not. Yet, estates have more aspects than just trusts and wills.
You will also want to consider filing a power of attorney form with a family member who you trust.
Your Local Estate Tax Laws
Estate tax laws can vary widely from state to state. In America, particularly valuable assets may be subject to a federal estate tax ranging from 18% to 40% of the asset’s value.
However, individual states may have individual estate tax laws regardless of federal taxes. These states will either have an estate tax, an inheritance tax, or both.
Estate and inheritance taxes differ in their methods of collection.
When your beneficiary receives your asset, they must pay an inheritance tax. However, the government will take an estate tax out of your estate when you die.
You must consider these estate and inheritance taxes when setting up your estate, as your beneficiaries may end up with significantly less financial value than you had intended.
Consider The Needs Of Your Family
Your family’s needs are some of the most vital factors to consider when setting up your estate. Most people choose to set up an estate for the benefit of their families, any of their friends, or their favored charities.
However, you must carefully consider the needs of your family when planning your estate, rather than simply willing them assets that you believe will make them happy.
When setting up your estate, plan to meet the needs of your family, financial and otherwise.
If you have minor children, consider setting up guardianship for them if necessary. Likewise, you may choose to sell a valuable asset in your trust to provide college funds for your children.
Itemizing Your Inventory Can Be Difficult
When drafting a will or a trust, you will want to compile an exhaustive list that contains all of your assets and owned items, as well as their value and any other vital information.
This list may contain anything from your car to a building you own or a prized fish tank.
However, itemizing your inventory can be challenging and time-consuming, especially if you are ill or elderly.
When itemizing your inventory, consider enlisting help from a family member or a friend to make the effort easier for you.
Set aside a few days to itemize your inventory, as this endeavor is not easy!
Not All Assets Are Physical
Your itemized inventory list should contain all of your assets- however, not all assets are physical. Your list should reflect these non-physical assets, as well.
These non-physical assets include any stocks and bonds you may have, a family business independent of any building, or retirement accounts.
As part of an estate, you can will these assets to your beneficiaries just as you can give them a house, a car, or cash.
Therefore, you must consider and list these non-physical assets along with your physical ones.
Consider That Life Changes
You may have thought that you can set up your estate and then leave it in place until you pass. While you certainly can do this, it is not a recommended course of action.
Life can have many unforeseen circumstances, ranging from upsetting events such as a death in the family to significant personal developments such as the acquisition of new property.
When setting up your estate, you must consider that things can change before your estate goes into effect. You may find it wise to treat your estate as a living document and update it regularly!