You — yes, you! — have an estate.
In fact, almost everyone reading this does.
“Estate” is just a word that describes all the things you own. An estate often includes cars, homes, bank accounts, investments, furniture, and pretty much anything else that can be considered a personal possession.
And no matter how large or small you think your estate is, the truth is that none of us can take any of it with us when we die. That’s what makes estate planning while you’re still in good health so important.
If you want to learn how to set up an estate plan that makes your assets work for your loved ones even after you’re gone; this guide will walk you through why it’s vital to have an estate plan in place, best practices for getting one set up, and the three most important items that you must make sure are featured in your estate plan.
What Is Estate Planning and Why Is it Important?
Perhaps you think estate planning has to be a complicated and expensive process. Perhaps you’re concerned you don’t have time to go through the formal estate planning process. Or perhaps the idea of planning for the end of life is simply overwhelming for you. It’s all understandable.
However, without solid estate planning, any kind of arrangements you’ve made might not hold up after you die. This could cause decisions about your precious family heirlooms, hard-earned savings, and even children who were in your care at the time of your death in the hands of the probate court — which often doesn’t have your family’s best interest in mind. The average estate can take up to two years to get through the probate process. And as much as 8% of the assets in the estate can be eaten up by attorney fees, appraisal fees, and more.
But with a little estate planning, you can create legal documentation in which you’re able to dictate how your savings should be disbursed, how your family should handle any valuable possessions you’ve collected, who should take over your role in the family business, and even who you want to look after your young children.
Estate planning removes some of the uncertainty that comes with the end of life and makes the process of asset distribution and guardianship much more private, simple, and affordable for your heirs. And, it doesn’t have to be a scary, arduous, or especially expensive task! Just keep reading to learn some of the best practices and critical items you’ll need to create an estate plan that protects your wealth for you and your loved ones.
Best Practices for Estate Planning
If you don’t want your estate plan to resemble a rough pirate map that may or may not lead your relatives to buried treasure — here are a few key things to keep in mind when it comes to estate planning.
Meet With a Professional
If there is just one point you take away, let it be that it’s generally unwise to go it alone with estate planning.
If you have a relatively simple estate, you may be able to use a template or online service to do a lot of the paperwork that comes with estate planning. But no matter how simple your estate or your plans for it — it’s wise to involve a legal expert at some point in the process to make sure you aren’t making any unintended mistakes that could end up being costly for those you leave behind.
There are all-around professional estate planners (such as those recognized by the National Association of Estate Planners & Councils) who can help guide the entire process; accountants, tax experts, and financial professionals who can help weigh the financial implications that come with different estate arrangements and preserve as much of your assets as possible; and of course estate law, probate, and trust attorneys who can draft the actual documents that will outline your estate plans.
Start Sooner Rather Than Later
Impactful decisions like those that come with estate planning shouldn’t be put off until you have to make them.
The sooner you start thinking about estate planning, the more time you’ll have to make sure you feel good about all the important, detailed decisions you have to make.
In fact, some estate planning documents, such as wills, are only recognized by legal entities if they’ve been signed in the presence of witnesses — an act that requires forethought.
Plan Carefully When it Comes to Executors and Guardians
Anyone who’s ever asked a close friend or loved one to officiate their wedding ceremony might know this: It’s surprisingly hard to find the right person. Some people get shy about the duties and others just aren’t suited to it. The same is true about asking someone to handle the duties associated with executing an estate or taking guardianship of a minor — both of which can come with years of responsibility and decision making.
Make sure you think long and hard about who you trust to take these jobs seriously. A professional in the estate planning space can provide guidance on the people in your life who might be best suited for these important roles.
Revisit Your Estate Plans Regularly
How often should estate plans be updated? Ideally, everything should be reviewed and updated as needed every three or four years.
This will ensure that everything (and everyone) that needs to be in your estate plan is accounted for and that any new taxes or laws relevant to your estate are considered. It also gives you the opportunity to make sure the documents still reflect what you want to be carried out.
With these best practices for estate planning under your belt, let’s dive a little deeper into three specific pieces of documentation that are key for every healthy estate plan.
3 Critical Items for Estate Planning
When a person dies without a legal estate plan in place, their heirs may have to go through a labyrinth of legal battles and expenses before determining who will receive which assets. But with these three items in place, your successors can avoid these hangups.
1. A Well-Planned Trust
A trust is a document and a legal entity that “manages” your assets according to your wishes once you’re no longer able to.
Trusts are closed to the public and are not subject to probate, which means your assets can pass directly to your loved ones quickly and quietly. Trusts can also help beneficiaries — whether they are people or organizations — save money on taxes and fees. Trusts are also unique in that they can help the living manage their own assets in a way that saves money even before their death.
Trusts have three important participants:
The Grantor: A grantor is an individual or a married couple who works with a professional to determine which of their assets go into the trust, who gets these assets or the proceeds of these assets, and any other rules they want to create around their assets.
The Trustee: Whether a family member or a professional, a trustee acts as an intermediary between the grantor and their heir(s). A trustee may need to administer the trust once or manage it on an ongoing basis — for which they may be compensated.
The Beneficiary: This one’s short but sweet, as a beneficiary doesn’t really have to do much beyond interact with the trustee to collect what the grantor has passed down to them via the trust.
2. An Up-to-Date Will
Even with a good trust, it’s still wise to create a will. This is because while a trust guides the management of specific assets, a will creates a comprehensive plan for your entire estate as well as any minors for whom you’re responsible. Your will is also the place where you can put other wishes, such as those pertaining to your funeral, down on paper.
It’s important to remember, however, that wills are public documents and can be subject to the probate process.
Just like trusts, wills also have a couple of key participants:
The Testator: The testator creates the will, ideally with the help of a legal professional and witnesses to protect its legality and keep it out of probate.
The Guardian: If the testator thinks there’s any chance they’ll be caring for a child or another minor at the time of their death or incapacitation, they should use the will to appoint a legal guardian for this person.
The Executor: Like a trust’s trustee, a will’s executor follows the guidelines set out in the will to carry out the testator’s wishes.
The Beneficiary: A beneficiary inherits the assets outlined in the will.
3. The Appropriate Powers of Attorney
Generally speaking, a power of attorney is a legal document giving another person legal authority over you or your possessions for a specified reason and amount of time. There are a few special kinds of powers of attorney that people should think about when completing their estate planning.
A Durable Power of Attorney
With a durable power of attorney, you can appoint a specific person to be in charge of your financial affairs if you ever become incapacitated. Typically, this agreement lasts until you’re recovered and can regain control — or until your death, at which point your other estate planning documents such as your will and trust take over.
A Health Care Power of Attorney
Just as a durable power of attorney allows someone to make financial decisions on your behalf, a health care power attorney allows someone to make medical decisions on your behalf. Again, this arrangement usually lasts until you recover or until you pass away and other legal documents kick in.
How to Keep Your Important Estate Plans Safe and Sound
In this digital age, you don’t just need a will, a trust, and documented powers of attorney — you also need a digital vault where you can securely store, access, and even share this estate planning information with family members and beneficiaries.
And there’s only one place where you can do all of this and more: Kubera.
Kubera is an easy-to-use wealth management tool that enables you to monitor and optimize your entire asset portfolio — from traditional investments to modern cryptocurrencies to estate planning documents that ensure your wealth continues to work for your loved ones even after you’re gone.
Kubera does this by offering a “Safe Deposit Box” feature where you can securely store your most important estate planning documents and appoint a beneficiary who will get access to these documents as well as your entire portfolio of assets if you become inactive on your account.
Having an estate plan is vitally important. And making sure it lands in the right hands when the time comes is just as important.
Try Kubera today and set up your estate and your loved ones for success.