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Controlling the Disposition of your Tangible and Intangible Assets with Estate Planning

February 27, 2015

If you do not have an estate plan, state law will control who your assets go to upon your death.

A well designed estate plan is important in the process of building wealth, minimizing taxes and alleviating stress for your loved ones once you die. It is undoubtedly difficult to confront these painful realities and may be easier to simply say “I’ll deal with that later” when faced with the estate planning process. However, life is fragile and nothing is certain, so it is crucial that you plan ahead.

The first steps

The process of estate planning begins with an analysis of your assets... Prepare a list of all of your assets with descriptions, account numbers, ownership and current fair market value. This might include cash, stocks, bonds, real estate, life insurance, automobiles, pending inheritances, patents, trademarks, individual retirement accounts, 401(k)’s, pensions, and collectibles.

Next, prepare a list of all of your liabilities with details such as lender, monthly payment, interest rate, maturity date, current balance and security. Your liabilities will include things like credit cards, mortgages, home equity loans, automobile loans, life insurance loans, and margin trading accounts.

Calculate your net worth by subtracting the total of your liabilities from the total of your assets.

Determining what you have to leave to your beneficiaries is the easy part! The more difficult task is determining who will be your beneficiaries. These beneficiaries could change depending on life circumstances, but can be anyone (with a few exceptions) including spouses, partners, parents, siblings, children, stepchildren, friends, charities and other relatives.

Useful documents

You may need some or all of the following documents which need to be periodically reviewed and updated depending on life changes.

  • Last will and testament: After debts and taxes are settled, you can decide how you want your assets allocated. Your will determines who will manage your estate after you die and who will care for your young children if you have any.
  • Trusts: Trusts are a useful tool to help you distribute your assets in a private and efficient manner. Certain trusts allow for tax savings, probate avoidance, help for a disabled beneficiary or the chance to make charitable gifts.
  • Durable power of attorney: In the unfortunate incident that you will not be able to manage your finances, due to illness or incapacitation, you can use a durable power of attorney which allows you to choose a representative to perform financial tasks on your behalf while you are alive.
  • Living will: This document declares what life-sustaining medical treatments you will accept or refuse.
  • Health care proxy: If you become unable to make health care decisions, this document designates someone who will make medical decisions on your behalf.
  • Letter of instruction: This letter is used to outline other issues to be considered after you die and is given to the executor of your estate. The letter should include your wishes for funeral services, insurance contacts, a list of relatives to contact, location of financial statements, combinations to safes, and desired obituary details. A letter of instruction is also useful to spell out how you might like certain pieces of personal property, such as jewelry, to be distributed. The more detailed the letter, the easier it will be for your executor to carry out your wishes.

How important is estate planning?

With a detailed estate plan, you are making sure your assets will be given to your desired beneficiaries in an efficient manner. An estate plan also ensures that you are in good hands in the unfortunate event that you become incapacitated. A thoughtfully designed will and estate plan will allow everyone to rest easy. An estate planning advisor can help ease the seemingly burdensome process. Questions? Contact us.

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