Estate Planning: What it Means for Your Heirs

Death can seem distant to young professionals just starting their journey towards building wealth.

The cold truth is that nobody knows what might happen next. Health problems and other freak accidents can occur at any moment. This is why having an estate plan can be dangerous, similar to riding on the freeway in a car without a seatbelt.

It’s not too late or too soon to start one. Investors can revisit the foundational plan regularly to adjust it as the circumstances change.

First, create a trust. Then, appoint a trustee. Although this may seem overwhelming at first, it can be made easier if you think of it as a love note from your heirs.

Begin with a vision for your future. Consider the people and charitable goals that are most important to you. This will help you decide how to distribute your assets. This is the final step.

Minor children are required to create a trust and name guardians. Ideal worlds would have a guardian for the child and a trustee for the estate. This allows you to benefit from the expertise of different people and helps minimize conflicts of interest.

A Document in Continuous Evolution

Once you have a basic will and trust in place, it is possible to modify your estate plan as needed. You should also remember that your personal needs must be considered in any long-term estate plan.

Next, you need to create and implement a financial strategy to help you achieve your long-term wealth-building goals. Here are some steps to help you get there:

Regularly review and update your trust and will. This is particularly important if your investment portfolio gets more complicated or if your family situation changes.

Tax mitigation strategies can be used to reduce or eliminate investment income tax. Asset location is more important than asset allocation in today’s complex tax environment.

You may want to consider additional planning strategies in order to deal with the complex estate tax rules. These rules can vary depending upon your net worth.

General Ownership Questions

Keep in mind, however, that different assets may — and should — receive different treatment. Here is a quick overview:

You should take care of assets that you own. If you have treasured heirlooms that are valuable, it might be worth considering assigning ownership to each item. This can be tedious, however. Another option is for heirs to bid on items with money they have been given from the estate.

Depending on the asset’s liquidity, the executor can either sell it to raise funds or keep it and distribute it to the heirs according to the terms of the will.

Other assets such as those jointly held will be transferred directly to the surviving joint tenants, while qualified retirement plan assets (including IRAs and 401(k),s, 403b)s profit-sharing plans, pension plans, and pension plans) go to a named beneficiary.

To pay outstanding debt, assets subject to lien may be sold. Alternately, the executor could use cash from an estate to pay off the debt while retaining the asset.

Life insurance proceeds are passed directly to the named beneficiary.

Your future can be secured by leaving your estate to your beneficiary or contingent beneficiary. Even single parents without children need a will. Wouldn’t it be better to leave your wealth to someone you love or a relative?