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  • Kimberly Stone

Estate Planning Essentials

We work hard providing for our loved ones. We can also provide for them when we're gone with an estate plan that legally conveys our desires to all our heirs. Estate planning also includes appointing key family members or an attorney to carry out our requests if we become incapacitated during our lifetimes.

An important step in estate planning is creating an inventory of your assets. The executor of the estate, or the person you designate to carry out your last wishes, uses an inventory of your assets to make sure all of your property passes to your heirs. If proper planning and the right documents are not in place, probate court can result in unintentional allocation of assets.

Essential Estate Planning Documents

Wills. Effective only upon your death, a will is a written document that gives your heirs the blueprint of your wishes and intentions. In your will, you may allocate assets to your heirs, appoint an executor to distribute your assets, and designate a guardian for your minor children. Wills must pass through probate court to ensure that the will is legitimate and administered as stated.

Trusts. Taking effect upon creation, a trust is a legal arrangement where a trustee holds legal title to property which is in the name of the trust. A trust can commence allocating property at any time after it is created. Trusts often help save time, money, and estate taxes as it is administered outside of the courts and remains private. A trust can also assist in planning for disabilities or incapacities.

Guardianship Designations. For those with minor children or plans to have children, choosing a guardian is a crucial element to include in a will. It’s also a good idea to designate a backup guardian at the same time. If no guardians are specified in your will, it could be left up to a court to pick a family member of their choosing or even decree your children as wards of the state if no other viable option is made evident.

Information memo. Keep a list of your insurance policies, brokerage accounts, businesses you own, outstanding debt, credit cards, tax-related documents, and names and phone numbers of professional advisors in a single place that can be easily accessed. As time passes, review this document and update as necessary.

Durable power of attorney for finances. POAs allow you to designate an individual or adviser to make financial decisions on your behalf if you become incapacitated. This individual can sign checks if necessary and can be given access to your checking and investment accounts.

Medical directives. A directive names an individual to make healthcare decisions for you in the event you become unable to make them yourself. This individual should be somebody you feel confident would be likely to advocate for a course of action you would approve of. A standby person should also be appointed, in the event your primary pick is inaccessible at the time needed.

Funeral instructions. Detail what you feel is best in your specific situation. Include a list of relatives, friends, and business associates to be notified by your immediate heirs. This is usually part of the directives made in a legal will.

Beneficiary Designations. The beneficiaries designated on your insurance and investments take precedence over wills and trusts. It’s important to occasionally review your beneficiaries and contingent beneficiaries, especially after major life events such as marriages and births.

Digital Assets Planning

It’s likely that some of your assets exist in digital form. Documenting your digital assets along with your physical belongings can help ensure your final wishes are honored and your estate is administered correctly. Here are a few items to keep in mind as you compile a list of your digital assets:

Passwords. In order to review financial accounts with banks, brokerages, or other businesses, your executor will need your current passwords. If you protect passwords with additional encrypted apps, include the master access info. Most importantly, keep your list updated when you change passwords. Include URLs, usernames and passwords for nonfinancial accounts like email and online storage sites. These accounts can be essential for retrieving invoices, statements, and other paperwork which may be delivered electronically vs hard copies.

Device access. The physical assets you use to access your digital data include your phone, tablet, and computer. That means your executor will need passwords and file names to access those devices. Also, list the location and encryption information for offsite or standalone storage devices such as external hard drives.

When it comes to estate planning, make sure to include all the legal documents pertinent to your situation along with the proper information needed to access accounts and digital assets.

Contact us if you have questions about how your personal or business assets may be affected by estate tax laws.

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