You’ve worked hard for everything you’ve earned, and you deserve to make the most of every penny. While you can’t take it with you, with a solid estate plan in place, you can remain in control of your wealth long after your gone. Use these 8 estate planning strategies* to help safeguard your assets and your welfare starting today.
1.Have a will & keep it up to date.
Where there’s a will there really is a way to control how your assets are managed after you die. As sensible as this sounds, only 32% of people had a will in 2020. If you die without one, your estate will be divided in probate court and everything you’ve worked hard for could get eaten up by court costs. A will also details guardianship wishes, medical wishes, and even funeral wishes. Get it done and revisit it regularly. Laws and lives are forever changing.
2.Designate advocates to speak for you.
To ensure that your wishes are adhered to in every way, it’s important to name these advocates in your will. Resolve to revisit your will every few years or when there is a significant life change in case the people you’ve named need to be amended:
•Power of Attorney - To make financial decisions on your behalf if you become incapacitated.
•Health Care Proxy - Allows someone else to make health care decisions on your behalf if you can’t.
•Legal Guardian - Designate a person to care for your children should both parents pass. Most important: Talk to your advocates about your wishes and review your decision periodically. Circumstances change.
3.Gift money while you’re still here.
There’s no reason to wait until you’re gone to gift portions of your estate to your heirs. Your gift is tax-free to recipients, and if you’re concerned about your estate being taxable, know that these types of monetary gifts will bring down your taxable amount. You can gift up to $15,000 a year per person (as of 2020). Best of all, you get to enjoy being the bearer of a truly appreciated gift. Talk to your tax advisor for specifics and current rules.
4.Consider setting up a trust.
If you have a large estate or are concerned about how your heirs might handle the money you leave them, set up a trust to control how your money is distributed. You can also appoint a trustee to manage your wealth should you become incapacitated. Consult an estate attorney about which type of trust best meets your goals, cash flow needs, and impacts your tax liability.
5.Designate all beneficiaries.
On most every legal contract, from financial accounts to 401Ks to life insurance policies, there’s a spot to designate a beneficiary upon your death. It’s important to understand that even though you may make designations in your will, the named beneficiaries on these documents supersede your will. Be sure to revisit all designations regularly.
6.Plan for long-term care.
A good estate plan attorney will advise you to have a financial plan in place to cover the cost of long-term care should the need arise. While long-term care insurance is one option, there are other ways to comfortably ensure you’ll have the funds you need to receive custodial care that won’t create undue financial stress on you or your adult children.
7.Retool your retirement portfolio.
While it’s wise to contribute to nest egg builders like a 401k or IRA when you’re younger and employed, retirees should convert traditional accounts to Roth accounts that come with tax-free distributions. Keep in mind, any amount you convert is taxable on your income taxes. The trick is to limit each year’s conversion, so you don’t end up in a higher tax bracket.
8.Choose the right advisor.
You may already have a financial planner or an investment banker assisting you with making the most of your dollars now ó but when it comes to controlling the distribution of your wealth upon your death, you need an estate planning attorney who knows estate laws. Be sure to revisit your plan every 5 - 7 years or after any significant life changes.
First Service Bank is always here for you.
Throughout your life, numerous financial questions and circumstances arise that call for expert guidance. Thoughtful estate planning is something everyone can benefit from, regardless of how small or large your estate may be. As your bankers, our team is always ready to assist you with these needs, and our doors are always open. Call us at 501-679-7200 and we’ll direct you to the right person to help you out.
*These tips were adapted from an article in US News & World Report