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7 Steps to Creating an Estate Plan That Keeps Your Family Out of Court

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Many people fail to create an estate plan because they don’t truly understand what is involved and therefore believe it is too complicated. But the real truth is that creating an estate plan during your lifetime is far less complicated than what your family will deal with after you are gone, if you don’t:

1. Create a Trust. When most people think of preparing for the end of life, they think of writing a Will, but having a Will without a Trust is a fast track to put your family in the Courthouse after you are gone. Instead, to keep your family out of Court, you’ll want to set up a Trust and title all of your assets to be owned by that Trust.

2. Designate beneficiaries. Designating beneficiaries for your retirement accounts and insurance policies is critical because these assets do not pass through your Will or Trust. Filling out beneficiary designation forms for each of your accounts will ensure these assets pass to the people you want to have them and stay out of the Court system. Be sure to review your beneficiary designations periodically to be sure they align with your current circumstances. Hot tip: never name minor children as beneficiaries of your retirement account or life insurance policies AND, if you have more than $150,000 in a retirement account, consider a special Retirement Trust to ensure the most beneficial tax treatment for your loved ones.

3. Avoid estate taxes. Most of us will not have to worry about estate taxes since the federal estate and gift tax exemption is $5.34 million ($10.68 million for married couples) in 2014 and indexed every year for inflation. However, if you are married and wish to take advantage of portability – where spouses are entitled to each other’s unused exemption – the surviving spouse must file the required paperwork to claim the exemption.

Some states and the District of Columbia have state estate taxes, (Florida does not) so you could still owe even if your estate is too small to owe federal tax.

4. Leave a letter of instruction. Not everything– like instructions for your funeral – needs to be put in your will or Trust. A letter of instruction with your family or attorney can ensure your final wishes are respected. Take it one step further with a Family Wealth Legacy CD or DVD in which you record your values, insights, stories and experiences for your loved ones to refer to for generations to come. We provide this service at no additional charge for our clients because we know this is one of the things families value the most and is least often handled.[CF1]

5. Sign a durable power of attorney. Estate planning is not just about death, but also ensuring your family can handle your affairs in the event you become incapacitated. Signing a durable power of attorney that designates someone to handle your financial affairs will save time, money and hassle for your family that, without it, will have to go to court to have a guardian or conservator appointed to manage your financial affairs.

6. Create an Advance Healthcare Directive. This document designates a decision maker of your choosing to make sure your wishes are followed when it comes to the medical care you may or may not want to receive when you are incapacitated or near death. You will also need to sign a HIPAA release form so your medical records can be released to your health care agent and medical professionals can discuss your medical care with your designee.

7. Organize your paperwork and digital files. Since many of us live our lives online these days, make sure your executor has access to all your digital information, including website addresses and the log-in information for those sites. Put all your important paperwork – deeds, insurance policies, bank and brokerage statements, etc. – in one file and let your executor know where it is.

Bonus tip: If you have minor children at home (or adult children with special needs), don’t rely on naming guardians in your Will alone. Create a comprehensive Kids Protection Plan to ensure your children’s care is covered not just for the long-term, but for today as well.

Finally, contact us about scheduling a Family Wealth Planning Session so we can sit down and talk about designing a plan that fits the needs of you and your family.