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If you think estate planning is only for the sick and the elderly, think again. Unfortunately, death can happen to anyone, regardless of age, and you don’t want to leave your family after you die to pick up pieces of a disorderly fortune while they sort out their grief. Instead, take the load off their shoulders and create order when you’re not around.
Every time you stop and think about what will happen to your possessions after your death, you are in the early stages of estate planning. But now might be a good time to take those plans a step further with our guide to estate planning and how to make an estate plan at any age.
By taking charge of your finances and learning about estate planning, you can be confident that you’ve taken the necessary steps to protect your family and assets.
What is Estate Planning?
Estate planning is the act of hiring an estate planning attorney (or trustee) to help prepare the transfer of property, possessions, charitable contributions, donations, and property in the event of death or incapacity.
This means making a plan to divide your property (or possessions) among your loved ones in case you are unable to represent yourself at the end of your life.
We can also set up medical orders and medical powers of attorney to follow your wishes, if needed.
Three Elements of Real Estate Planning
Whether you’re creating your first estate plan or updating it later in life, every estate plan should have three basic elements:
1. Wills and Trusts
Anyone under the age of 40 should make a will or living trust to ensure that they can manage their property in the event of an accident or sudden illness. The difference between a will and a trust can be confusing as both are documents detailing how assets are to be disposed of after death or incapacity.
will:
- Tend to be more affordable than trusts
- Valid only after death
- become public after probate
- Slow transfer of assets
- May need to pass probate
Living trust:
- more expensive to run
- keep private
- can provide your intensive care or disability
- avoid probate
Both Wills and Trusts:
- You can leave an inheritance to your children.
- You can specify the name of the primary beneficiary
- Changeable
2. Power of Attorney
A power of attorney (POA) is a binding legal document that allows someone to make legal and financial decisions on your behalf. POA comes into effect when you die unexpectedly or when you are helpless and unable to care for yourself. These documents contain specific instructions for your attorney based on the specific circumstances of your estate plan.
If you don’t enact a power of attorney while you’re alive or physically capable, the court will hire someone to help you manage your property, make life-changing decisions, and even pay your bills. I need to appoint someone for this.
With this in mind, attorneys aren’t the only ones who can receive a POA. Family members may also be responsible. For example, a sibling may become a medical POA.
There are several types of powers of attorney:
- Perpetual Power of Attorney: This is when you allow someone to make decisions for you. This is the standard POA.
- Limited Power of Attorney: A limited power of attorney limits your attorney or agent’s powers to non-general POAs, such as financial and medical powers of attorney.
- Medical Power of Attorney: This is when you allow your attorney to make medical decisions if you are unable to do so. These include end-of-life decisions, surgery, and medications.
- Financial Power of Attorney: Much like a medical POA, it allows someone to make decisions about your money and property if you can’t.
- General Power of Attorney: This is a POA that terminates when you become incapacitated and an agent becomes in control of your financial, medical, legal, business, health, and property matters.
In most cases, powers of attorney can be renewed as needed for life. Medical POAs are an exception. The best way to change this is to create a completely new one. Typically, you change your POA when you hire a new estate planning attorney or agent to cover your business.
3. Healthcare Directive
Much like your medical POA, your healthcare order carefully details your end-of-life wishes and care. These documents may contain a permanent POA that allows another person to make health care decisions on your behalf. Depending on the guidelines, a living will detailing your wishes should you become incapacitated may also be included.
How to make a estate plan at any age
Planning a property is important for people of all ages. This is especially important for those who have close relatives or shares in the form of valuable possessions such as homes and other property, savings accounts and family heirlooms.
When it comes to planning real estate, people tend to think of elderly people, but accidents and illnesses can happen to anyone.
Under 40 Estate Planning
When making estate plans under 40, you first need to find a trustworthy estate planning attorney to handle your assets. Then create a living trust or will to ensure your estate plan is taken care of in case of emergency or malfunction.
40+ Estate Planning
Once you’re in your 40s, it’s important to be more specific with your estate planning. Within the next 20 years, a long-term retirement plan should be developed and, where appropriate, an updated and permanent his POA including health care instructions and a living trust.
Whether you’re in perfect health or ailing, we recommend planning your wealth by age 55. You can also set aside assets for charitable purposes at this stage of your wealth planning.
To make a charitable donation through the Estate Plan, follow these steps:
- Designate a bequest to a charity that is close to your heart and cherished.
- Select a predetermined portion of the property to donate.
- Once the real estate plan is realized, the money will be used for a purpose of your choosing.
Planning for property tax liabilities
The last thing you want to worry about is estate planning taxes that will affect your family after you pass away. will be This is often called a death tax or estate transfer tax.
In 2022, your total inheritance will be Less than $12 million — and this number increases every year. If your wealth reaches a threshold and you want to reduce it, donate a portion of your wealth to charity, transfer it to your surviving spouse, or transfer your property to a friend or family member during your lifetime. can.
Benefits of Estate Planning
Estate planning is more than bequests and end-of-life decisions. Careful estate planning has many other benefits. These include:
- Reduce taxes and debt to loved ones with gifts and marital trusts
- Charitable donations from part of the posthumous estate
- Allows small business owners to easily transfer wealth to family, friends or co-owners
- Cover funeral costs yourself and save money for your loved ones
- May save your family from probate, a costly process
Common estate planning mistakes
Mistakes in real estate planning can happen on a daily basis, especially when you try to do everything yourself. The biggest mistake you can make when creating a property plan is not hiring the right property representative.
Another common mistake is forgetting to renew your will or power of attorney during your lifetime. Confusion and legal battles can arise after your death if there is a portion of the estate bequeathed to certain deceased beneficiaries.
For example, say you requested that your property be divided equally among your children, but one of them has since died. When you die, your spouse or children may claim a portion of your estate. If you don’t specifically name your loved one and have a clear inheritance plan, the confusion that arises can lead to a split in the family.
Estate Planning Frequently Asked Questions
There may be more lingering questions when it comes to the basics of estate planning. Luckily, we’re here to answer frequently asked questions.
How much does a real estate plan cost?
The cost of hiring a estate planning attorney to draft a will or living trust will vary depending on your needs and location. For more complex properties, he ranges from under $1,000 to over $10,000.
If you have a larger estate, the cost of a will can increase significantly. If your property is simple and you own few assets, a property plan may be cheaper to do.
What is a common estate planning document?
All estate plans should consist of a will or trust, power of attorney, medical directives, designation of guardians and beneficiaries, and consent forms.
Real estate planning budget today
Now that you understand what an estate plan is, when to start planning one, and what documents you need for both your family and your attorney, you can take the next step in your estate planning journey.
As you begin to consider investing in a real estate plan, remember that preparation is key. Check out our Retirement Planning Calculator or Net Worth Calculator to decide how much to leave for your family once your estate plans are in place.
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