No matter how much money you have it is important to have a basic estate plan to protect your family and your assets after your death.
An estate plan can be as simple as a last will and testament to extremely detailed to contain a power of attorney, a living will and even a trust.
We'll cover each of these tools in order.
The first and often the most important instrument to put in place is your last will and testament.
A will is a legal document that outlines your wishes regarding your assets after you die.
Many people make their own wills through software or forms they download off of the internet but this isn't always a wise choice.
Requirements for wills are different from state to state and are not always easy to interpret.
If you don't create a will that can be validated in probate court then your estate may be disposed of as if you never even wrote a will.
The bottom line is that hiring a professional to help craft your last will and testament is a smart choice and it can be done for a reasonable fee.
Your will establishes your wishes with respect to your property, but what if you become incapacitated and can't direct others as to your wishes? This is where powers of attorney come in to play.
A power of attorney authorizes someone else to act on your behalf in business and legal affairs.
A durable power of attorney allows another party to act on your behalf if you become incapacitated and are not capable of making decisions on your own.
A health care power of attorney is a durable power of attorney that is specific to health care situations.
A living will communicates your intentions regarding health care if you become unable to communicate them on your own.
A living will is usually created in tandem with a health care power of attorney.
The living will spells out your wishes and the heath care power of attorney allows somebody else to act based upon those wishes.
Trusts are another mechanism that will allow you to disperse your property while placing restrictions or requirements on the property.
Trusts aren't just for the wealthy.
If you have dependent children that you with to leave money to, you can have it held in trust until they reach an age of your choosing.
Trusts can also be an effective means to minimize taxes associated with your estate.
Lastly we are going to cover some of the tools that are available to help manage your tax burden upon your death.
Life insurance is one of the primary methods to manage taxes at time of death.
There are also a large variety of trusts that are effective as well.
Estate planning for tax consequences is one of the more complicated aspects of estate planning and a professional can help you craft an appropriate plan.
Now that you are familiar with some of the estate planning tools it is time to start the process.
Whether you go it alone or enlist the help of a professional the first step is to create a list of all of your assets.
Once you have your list of assets you will need to make a decision about what you'd like to happen to each asset upon your death.
Should it go to family, your alma matter, your favorite charity or someplace else that is near and dear to you? Estate planning can seem like a daunting undertaking, but knowing that it is very important and taking it one step at a time will help you complete the process.
Hiring professionals to help you in the process is also extremely helpful and highly encouraged.