Financial and Legal Matters to Consider in Estate Planning

It is necessary to draft a will while you are alive and healthy to decide who will control your finances and make other crucial decisions regarding your life—in case of your death or incapacitation. Estate planning is a primary part of drafting a will. It includes thoroughly assessing all your assets and ensuring their smooth transfer to the people and organizations of your choice. Properly planning all legal and financial aspects of your estate will save your loved ones from several problems.

The first step in planning a basic estate is to inventory your stuff. The next step is to identify the needs of your family. After that, wisely choose legal directives to carry out your wishes. Carefully review your beneficiaries and thoroughly read the estate tax laws of your state because one goal of estate planning is to ensure that your chosen beneficiaries receive assets with minimal tax payments.

You can also take professional help to plan your estate. For handling a complex estate, you can take the services of an estate attorney or tax advisor. However, many online last testament writing programs are also available to help handle small estates. Trust and will is an online platform that provides easy, fast, and secure online estate planning services at affordable rates in the US. They also assist you through all the legal and financial aspects of estate planning.

In this article, we are going to discuss the financial and legal matters to consider in estate planning.

Financial aspects to consider in estate planning

Estate planning requires several financial considerations. Some of them include;

1. Updating your insurance

It is essential to update all your accounts like retirement accounts, life insurance, and other annuities on a regular basis because all of your financial accounts will be passed on to your beneficiaries directly in case of your death or incapacitation.

Therefore, it is crucial to contact all life insurance companies with your accounts and ensure that your beneficiaries are listed correctly and updated regularly.

2. Analyzing your financial situation

It is essential to analyze your financial situation before estate planning because it helps you develop an excellent financial plan for the future. The first step in assessing your financial situation is identifying and gathering all your crucial financial documents. Review everything to estimate the value of all of your assets. It is also necessary to determine your current and future cash flow. Comparing your assets and cash flow to liabilities will help calculate your overall net worth.

You can also take the services of an estate planning lawyer to assess your financial circumstances. A competent lawyer will help you consider other factors that can affect your financial situation, like inflation, retirement, or any other unexpected but significant expense. Moreover, they also assist you in adjusting your finances accordingly.

3. Reviewing taxes on your estate

Taxes can take away a considerable portion of your estate. In the US, every state has different rules regarding tax on the estate, which also impacts the monetary value of the estate. You can work with a tax advisor to understand how state taxes will affect your estate and develop ways to minimize and avoid them. Moreover, estate planning lawyers can also help you create a well-structured tax plan to help you steer clear of any tax-related financial complications. You can also purchase a life insurance policy to help your heirs cover the estate taxes that may be implemented on your estate.

Legal aspects to consider in estate planning

Some legal matters which must be carefully considered in estate planning include;

1. Choosing legal guardians for dependents

Choosing a legal guardian for your dependents is a necessary task in estate planning. The funds you leave behind to cover your dependents’ educational and other expenses will be managed by their guardians until they are of legal age.

Most people choose their parents as guardians for their children. However, it is recommended to either name a backup guardian or choose someone else because parents are often too old to care for young children.

If you don’t choose legal guardians for your children, they can end up at foster homes, and your children may also be separated from each other. Therefore, it is crucial to choose someone you trust as a guardian for your dependents.

2. Selecting and signing an enduring power of attorney

An enduring power of attorney is a document prepared in a specific way and signed in the presence of qualified witnesses to be acceptable in court. It is a crucial legal tool in estate planning as it allows you to choose a person who will make decisions on your behalf. It is necessary to select a trustworthy person with a sound mind, or you can also choose your attorney to make financial decisions regarding your estate.

3. Getting the will signed by witnesses

A will is not considered legally valid without the signatures of at least two witnesses. In case the authenticity of a will is challenged after the death of the will-maker, the witnesses will be required to testify the validity of the will. Therefore, it is a legal requirement to sign your will in the presence of two witnesses. Moreover, a person should be of legal age and be in a good mental state to qualify as a witness.

4. Name Beneficiaries

Your chosen beneficiaries will be responsible for the distribution of your accounts after your death. Hence, it is crucial to carefully select your beneficiaries and ensure that they coordinate with your estate plan.

Beneficiaries are allowed to use the funds according to their own will even if you instruct otherwise in your testament. However, naming beneficiaries provides a convenient and fast way to transfer funds to your loved ones.

The Bottom Line

Estate planning is a crucial part of drafting a will. It outlines how you want your wealth to be utilized after your death or incapacitation. Preparing an estate plan can be a complex process, so it is encouraged to seek the services of an experienced estate planner or tax advisor.

Several financial matters like insurance, your financial situation, and tax on your estate must be considered carefully in estate planning. Moreover, some legal matters to be considered in estate planning include naming guardians for dependents, naming beneficiaries, selecting and signing an enduring power of attorney, and signing the will in the presence of two witnesses.