Creating an estate plan is a lot like getting into better shape. We all know we should do it, but most of us never make the first move because the task seems daunting.
You will have to look elsewhere for a diet and exercise plan. But if you need an estate plan, you can be sure that these seven easy steps will help you, with an assist from an attorney.
Step 1: Sign an estate document
Let’s face it: We all know that a will is important. You need one to ensure that your chosen heirs will get the assets that you want to leave to them. In your will, you name an executor who will have the power and responsibility to pay your debts and distribute the remainder of your estate according to your wishes.
You can also use a revocable living trust to pass property to your heirs after your death. Unlike wills, living trusts avoid probate, the process by which a court determines that a will is valid. In some states probate is costly and time-consuming. Which leads us to step 2.
Step 2: Dodge Estate Taxes
The federal estate and gift-tax exemption is now $5.49 million and will increase with inflation each year. Spouses may combine their exemptions, so married couples can leave or give away $11 million without owing any federal estate tax. If you know your estate may be more than that, it is critical to transfer you wealth into a trust which avoids probate and therefore avoids the estate tax.
Step 3: Leave a letter
Sometimes everything you want to tell your survivors does not belong in your will. If you want to describe what type of funeral arrangements you desire, for example, you can do so in a separate letter. You can also use the letter to list items of sentimental value that you want certain heirs to inherit. Give the letter to a trusted relative, friend, or your attorney. While California may not recognize this letter as a legal document, your family members and other loved ones are likely to respect your wishes.
Step 4: Draw up a Durable Power of Attorney
A complete estate plan should also insure that your wishes regarding your money and your health care prevail even if you become too sick to make your own decisions. Create a durable power of attorney (DPA) so someone can manage your money if you are ever too sick to do so. In this document, you name a trusted relative or friend to take charge of your finances when you cannot. Unlike an ordinary power of attorney, a DPA remains in effect after you can no longer manage your own affairs.
Step 5: Create an Advance Health Care Directive
To maintain control over the type of medical care you receive when you are near death, you should sign a living will and a DPA for health care. (In some states, a health care directive combines the two documents.) With a living will, you state the type of medical procedures that you do or do not want. In a DPA for health care, you name a health care agent or proxy who makes sure that doctors and other medical professionals carry out your wishes if you are too sick to speak for yourself.
Step 6: Organize your Digital and Paper Files
Help your executor will by organizing your estate-planning paperwork and financial records, and store them in a safe yet accessible place. Keep the original documents in your lawyer’s vault or in a bank safe-deposit box or home safe.
Pull together any of the documents your executor will need, such as the deed to your burial plot; insurance policies; statements from your bank, brokerage house, and mutual-fund accounts; and pension and other employee-benefit information. Maintain an up-to-date list of your assets, the names and telephone numbers of your legal and financial advisers, and an inventory of the items in your safe-deposit box. Store these documents at home in a locked, waterproof, and fireproof metal box, file cabinet, or safe.
Do not forget about your digital assets, such as an online stock-trading account. Keep a separate list of your accounts and passwords and put it in a safe-deposit box or a vault, or give it to a person you trust.
Step 7: Review your estate plan at least every 5 years.
Make sure all of your documents still reflect your desires, and that your beneficiaries and financial and health care proxies are still willing and able to serve. In addition, you should revisit your estate plan if Congress revises the estate-tax law or whenever there is a major change in your life, such as a birth, death, marriage, or divorce.
Our law firm has family law attorneys in Los Angeles County. If you have an Estate and wish to talk with an experienced attorney regarding a Will, Trust or other Estate plan, you may contact us for an affordable strategy session. Contact Wallerstein Law to arrange a free consultation at (310) 438-5857