Old age and retirement are something that many people talk about, but very few plan for it. The most crucial topic is estate planning that is kept out of the picture. Perhaps the thought of death is too scary to consider. Or there aren’t expensive possessions or financial assets to leave behind for others.
But you know there are inevitabilities of life that cannot be steered away from, so yes, everyone, and not just the wealthy, needs an estate plan to minimize the impact of unfortunate situations.
Surprisingly, estate planning is not just drafting your last will. There is more than an outline of the asset distribution you own at your passing – healthcare and financial power of attorney (POA) and a living will being the two other major aspects.
Your power of attorney is a legal document in which you appoint a person as your healthcare/financial decision-maker for an event where you can’t make decisions yourself. And a living will is your advanced medical directive that dictates your medical care wishes and arrangements if you become incapacitated or terminally ill at some point in your life.
So, estate planning is a wide platform that allows you to streamline your assets when personal and financial situations change. If it is your first time doing it, here are a few things to consider for avoiding any loopholes in the process –
- Your Inventories
In the beginning, you may think that you don’t have enough inventories to justify your estate planning decision. But as you take every little thing into account, you might be amazed at the amount of tangible and intangible assets you own.
Think of your house, vehicles, antique items, personal possessions and intangible items such as savings accounts, stocks, mutual funds, life insurance policies, and equity in a business. Get a proper valuation done for their fair and equitable distribution.
- Debt and Mortgage Responsibilities
Generally, a personal debt dies with the borrower, but outstanding credit card balances and bank loans become the responsibility of your estate and are recovered from your assets. So, as you record your assets, make a separate list for open credit cards and other obligations. They may be auto loans, mortgages, property taxes, or similar liabilities you might have.
Assess the impact such debts can create on your assets after death and full-proof ways to protect them from creditors beforehand. An expert and experienced legal team can assist you in such matters.
- Family Requirements
There may be many people in your life who you wish to extend financial support to in your absence. That can be your spouse, child, friend, parent, or even a pet. But because each of them may have different needs, you want to ensure that you provide for and protect all.
So, have enough life insurance for your kids’ tuition bills. Designate legal guardians for them and also funds to support their upbringing. Do consider your parents’ in-home care charges when you cannot be there for them.
- Tax Effects
People often resort to estate planning to minimize inheritance taxes, but in actuality, they wouldn’t have to pay those taxes if the estate valuation is below a certain amount. Usually, it is large estates that are subject to taxes.
However, that doesn’t imply that your beneficiaries can dodge other kinds of taxes too. There can be a huge burden of capital gains tax, provincial probate tax, and U.S. estate tax (on your U.S. assets). Fortunately, there are plenty of legal professionals to take you through and help do with your estate planning in a way that minimizes the effects of such taxes.