Half of all Americans with children do not have a legal will, according to a 2012 survey conducted by the legal service RocketLawyer. But prevailing attitudes among Americans have changed little in the years since: when it comes to matters of inheritance and building a financial legacy, most individuals would rather focus on the here and now, rather than crafting a long-term plan. That can lead to some serious financial problems when the unthinkable inevitably happens.
The thing is, people who do not plan, love their children and want to provide for them. It is just that the concept of dying and not being there for their family can be a difficult concept to accept, let alone to plan for, especially for those who are young and still in their prime earning years.
But it is not just the young who are inadequately prepared for a mortality event. Some 41 percent of Baby Boomers – those age 55 to 64 – do not have a will, either. And these are individuals in a generation that is at the forefront of the largest transfer of wealth ever seen in human history.
It all points to a huge need for Americans to plan their financial legacy now. But where to begin? Thankfully, these four tips will help even the most unprepared get an idea of how to start. Read on!
Documentation is vital; sort out your will ASAP!
A will is the most basic estate planning document; it tells the world exactly where you want your assets distributed when you die. While you’re not legally required to have a certified professional create a will, you should strongly consider one. These documents may be contested by people who are unhappy with the decisions you made. You deserve the peace of mind in knowing that your life’s economic work and other wishes will be executed as specified, and your family will be grateful to you for not leaving them with the headache of trying to sort out your estate. Other crucial documents include your living will, power of attorney, durable power of attorney (including for health care), joint ownership and living trust.
Utilize executors and gifts effectively in your estate.
Real property, financial investments, cash and personal possessions encompass the financial assets that you own. Once you have identified specific gifts you would like to distribute, you can apportion the rest of your estate in equal shares among your heirs, or you can split it into percentages. For example, you may decide to give 45 percent each to two children and the remaining 10 percent to a sibling. Choose your executor, the person responsible for carrying out the wishes outlined in the will, wisely.
Consider an Irrevocable Life Insurance Trust.
Many individuals think of the income tax free benefits that may be had from life insurance, but they never realize that the same life insurance may push them into estate tax nightmares. An irrevocable life insurance trust can be established to assist you in passing your estate to your heirs without the surprise attack of life insurance that gets eaten by unexpected estate or inheritance taxes. The best part about it? One does not need to be super-rich to benefit from this tactful and ongoing approach to estate management.
Trusts can be another powerful estate management tool.
A trust is a legal entity that can own property. Properly structured trusts completely avoid probate and avoid the delays and expense that often accompany probate. Trusts are not a matter of public record. They’re a tool for maintaining privacy. And, even after your death, trusts can provide some measure of control over how assets are distributed to children and other beneficiaries. In addition, trusts are much more difficult to contest than a will.