What will happen to your assets after you pass away? Proper estate planning will ensure that your possessions will end up where they belong and ease the burden of your passing on your loved ones.
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Estate planning is one of the most important things people can do before they die to reduce the stress of their passing on their loved ones.
Proper estate planning can provide:
- Care of any minor children
- Distribution of important assets like cash and real estate
- Avoid loss of funds to estate taxes or legal fees
Yet many people shy away from estate planning because it can seem like an overwhelming task.
This guide contains information to get you oriented and points you to the right resources to get you started.
How Much Do I Need to Plan?
There is no one-size-fits-all approach to estate planning. How complicated your plan needs to be will depend on a number of factors — many of which will change over time.
Fortunately, you can always change, add, or delete features in your legal documents as your needs change.
Here are the questions to consider before you begin estate planning to find the plan that is right for you:
- Do you have children or other family members who can’t provide for themselves? If so, you will need to choose someone to take care of them and arrange for their income should you become incapacitated.
- Do you own any real estate? If so, you should make sure the correct person inherits the land or sells the land and correctly distributes the money from the sale.
- What kind of financial accounts do you have? Everything from your checking to your retirement account must be accounted for. They need to be distributed to the correct person with minimal tax.
- Do you have any significant personal property? Precious jewelry, cars, and other possessions can make lovely gifts. But it is up to you to make sure they get to the right person.
- What should be done with your remains? This question might be difficult to consider. You need to make a choice to be buried, cremated, donated to science, or another option. How will you pay for your funeral? Leaving clear instructions will save your loved ones the trouble of determining your wishes after you’ve passed away.
- Are you not married to your significant other? Although couples who are not legally married may feel as if they are married, they need to plan very carefully. They will not get any spousal privileges that formally married couples have.
- How should your medical decisions be made? Estate planning can also help if you are sick or incapacitated. You can decide certain medical decisions before such a situation occurs and designate a trusted family member to make decisions on your behalf.
Tools for Estate Planning
Several tools ensure your desires are met during your end-of-life care and after you pass away.
Last Will and Testament
Wills are the most well-known devices for explaining your last wishes. In a will, you can:
- Choose a personal representative to manage your affairs (called an executor)
- Designate someone to care for your children (called dependents) or pets
- Instruct your family on how to hand out your assets
Testamentary or “After Death” Trusts
Trusts are financial accounts managed by someone who does not own or receive the money within. They are handy if you want to make sure a minor or someone with special needs has enough income to reach adulthood safely after your death.
You can also consider a living trust created during your lifetime.
There are many types of trusts, so consult with an attorney or financial professional before choosing one.
Financial Power of Attorney
This document designates a loved one to make financial decisions on your behalf.
Medical Power of Attorney
This document (sometimes called a health care power of attorney) designates a loved one to make medical and health care decisions on your behalf. They become your health care proxy.
Living Will (Also Called Health Care Directive or Advance Directive)
This is not technically a will. This document designates who you want your medical power of attorney to be and leaves additional instructions concerning your end-of-life medical care.
Life Insurance Policies
This policy can provide some immediate cash upon your death to your family. It can be useful in covering short-term expenses, and any remaining money may be added to your overall estate to be passed on to beneficiaries.
Some financial accounts allow you to pick a person to receive funds immediately upon your death. This person is called a “beneficiary.”
Putting a spouse or other family members on your deed or bank account will allow them to take control of your money or property. They can do this without the courts or attorney involvement.
What Happens to Assets After Death?
After you die, your family is left to review and distribute your possessions. They must work with a division of the state courts, called the probate process, to accomplish this.
The probate court judge will determine what property and money are left after you die. These items are called your “estate.”
Some property might be excluded from the estate, including:
- Any money already in trusts (such as a living trust you set up).
- Property or accounts you own jointly with someone else (called joint tenancy).
The money in the trusts will go to the beneficiary (the person who owns the account) or the trustee (the person who manages the account). Property owned jointly will go directly to the co-owner(s).
If you left a will, the court would first determine that the will is valid. Then, the court will work with the executors to wrap up your affairs. They will donate or hand out your property according to your will.
If you die without a will it is referred to as dying “intestate.” The court will look to your state laws for intestacy statutes to decide how to divide your property. These laws vary slightly between states but the general rules are fairly consistent.
Should I Talk to an Attorney?
A few types of people can draft their own wills and other estate planning documents using DIY forms. Typically this works well for people with simple assets or people without children.
Keep in mind there are many requirements for a valid will and several important components to include in your overall estate plan.
If you are confused by the DIY process or feel your estate is too complex, an effective lawyer can help.
Find an Estate Planning Attorney Near You
An estate planning attorney in your state can help you:
- Understand and walk through the process
- Educate you on your state’s laws
- Create a will, trust, or other important documents
- Minimize tax liability and avoid probate
- Understand your rights as the surviving spouse
You can always find a lawyer from FindLaw’s attorney directory and choose among many quality-assured lawyers in your area.