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While it is not something that any of us like to think about, death is an inevitable part of life, and we need to be prepared for it. Not only do we need to be psychologically prepared, we also need to be financially prepared. After-death expenses, such as funerals and other costs, can add up quickly, and if you don’t have your estate in order, your loved ones will have to cover all of these expenses. The first thing to do is to hire an estate attorney, and choose your power of attorney, because more cases that mishandled estate administration and planning cases can be costly. Here are some more tips that will help you and your loved ones to be prepared:
- Have a basic estate plan in place – No matter how much you are worth, you need to do this to ensure that your wishes are met upon your death and your estate doesn’t end up in probate court.
- There are a lot of details to take care of – There are many details involved in an estate plan. These include power of attorney, a living will or a medical power of attorney, and a trust if there are children involved. You must also take state and federal laws into consideration when it comes to governing estates.
- Charitable gifts – You can donate to charities and watch your investments grow, without having to pay taxes. Select the charities you want to contribute to, both before and after your death.
- Take an inventory of your assets – Look at all of your assets, including real estate, life insurance, savings, investments, business interests, etc. Choose who you want to inherit your assets, who you want handling your finances if you become incapacitated, and who will make any medical decisions for you if you can’t do it yourself.
- Have a will draw up – This is going to state exactly who will receive what from your estate. Here you can name guardians for children, and make sure that they are supported. If you do not have a will, it can take years and cost thousands of dollars to determine who will receive the estate assets.
- Consider having a trust – This will allow you to have control over how and when your assets will be distributed to your heirs. This also helps to lower estate and gift taxes, and keeps the estate out of probate court, which can be lengthy and expensive. Some trusts offer better protection from lawsuits from creditors.
- Understand the federal estate tax exemption – You can leave up to $5 million to your heirs that are free from taxation. Anything over $5.25 million will be taxed by as much as 40%.
- Tax-free money for spouses – If you leave everything to your spouse, he or she will not have to pay any taxes, no matter what the amount. It may eliminate a lot of confusion, but if your spouse leaves the estate to your children, they will be responsible for the taxes. This is something you need to seriously think about before doing.
- Discuss your estate plans with your heirs – If your heirs have a heads-up about your estate plans, it will avoid arguments between your heirs later on.
- Tax-free gifts – You can give gifts of up to $14,000 to others, or up to $28,000 to your spouse each year without the money being taxed. You are also able to pay any amount of education or medical bills for others if you make the payments directly to the institutions where the costs are incurred.
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