Contrary to a surprising popular belief, estate planning is not just for the wealthy. Virtually every person has an estate that they can choose to leave to their loved ones when they pass away. Estate planning is just a means to make sure that process stays clear and seamless for all parties involved. Sadly, 57 percent of American adults do not have estate planning documents according to Caring.com.
To further demystify the process of estate planning and encourage people to do it, this article will explain how it’s done.
Definition of Terms
There are a lot of potentially confusing terms involved in estate planning. Here is a rundown of the most relevant concepts:
- Estate – A collective term for all the assets of a deceased person, including money, properties, and others. A person’s estate also includes the debts they may have.
- Will – A written document detailing how a person’s assets will be distributed after their death.
- Executor – A person or organization specified in the will to carry out its instructions.
- Trust – An entity that is entrusted with the assets in place of one or more beneficiaries.
- Beneficiaries – Parties set to receive the assets in a trust.
- Probate – The process of validating a will and paying the debts of a deceased person. It also includes the execution of the estate or the distribution of the assets.
Steps to Estate Planning
Estate planning is divided into three main parts for a smoother process.
Making a Will
Assets and Debts
The first step to making a will is creating a comprehensive inventory of all the assets the person has. Here is a quick checklist for reference.
- Real estate including homes and other land properties
- Collectibles including artwork, antiques, and rarities
- Personal possessions
- Money in checking and savings accounts
- Stocks, mutual funds, bonds, and other similar investments
- Life insurance policies
- Retirement funds including the 401K and other individual plans
- Businesses owned
Having estimates of the value of these tangible and intangible assets would be beneficial. For real estate properties, for example, recent appraisals will suffice.
Another inventory of all the debts and potential tax payments should also be made for a clearer picture of the assets to be distributed after these obligations have been fulfilled.
Establishing guardianship for children who are minors is the next step. If this is not specified, any family member can request guardianship and a judge will make the decision. To make sure the wishes of the parent is followed, and that the welfare of the children is prioritized, guardianship should be specified in the will.
For a smoother process overall, naming an executor of the estate in the will is recommended.
When a person becomes incapacitated, trustees can take over portions of the estate that have been designated. When the person passes away, the assets of the trust are transferred to the beneficiaries without going through probate court.
A healthcare directive outlines a medical plan for a person when they become unable to make those decisions for themselves. This may also mean naming a person to make those decisions.
This means granting someone power of attorney over financial decisions when a person becomes medically unable to do so.
Getting Legal Help
To make the process of estate planning in Indianapolis more efficient, our estate planning attorneys can help. Although the process seems straightforward, details like family law and estate taxes can be overwhelming without an attorney to guide you.
Contact Taylor, Chadd, Minnette, Schneider & Clutter P.C. today for your estate planning needs.