Truthfully, most people don’t prefer discussing end-of-life topics like creating a Will or real estate planning. It can be uncomfortable to think of the ‘ifs’ of not being around someday, but death is inevitable for everyone. The best you can do is devise a plan to secure the financial future of your loved ones. Here, real estate planning could be helpful. It will ensure that all your investments, assets, and wealth gets handed over to your family without any hassle.
Without an estate plan, your loved ones will be compelled to go through numerous legal proceedings to attain possession of all financial accounts and assets. Therefore, plan your real estate and ensure everything gets distributed the way you want. You can begin by hiring a competent attorney who would look after your estate. They ensure everything gets handled fairly and as tax-efficiently as possible.
Besides that, you must draw up a Will, select an executor, and choose people who will carry out your estate proceedings. Planning these matters will give you peace of mind, ensuring your children’s secure future. If you are thinking about where to begin, look below.
Here are six real estate planning tips to ensure your family’s protection.
1. Draft a Will
People often believe creating a Will is only for the rich. It doesn’t matter if you have multiple assets or only one; someone has to handle your financial assets after your death. Drafting a Will and documenting your assets will make things easy for your children. It should outline who gets which assets after you die. In addition to asset distribution, assign a guardian if your children are under 18. It will ensure they have someone to manage their inheritance until then.
You can also add the name of the trustee and beneficiaries in the Will to ensure everything is clear. Although there is no hard and fast rule for drafting a Will, people tend to get confused. In that case, look for probate services and stay on top of the process.
2. Assign Power of Attorney
Is there anyone in the family you trust with a blind eye? If so, consider assigning them a power of attorney. It would be someone who can handle estate matters on your behalf. For those residing in the Empire State, understanding the specifics of Power of Attorney New York is crucial, as state laws and requirements may differ. But remember, there are two types of powers, financial and medical.
- Financial power of attorney enables someone to take charge of money-related matters, such as writing checks
- The medical power of attorney allows a person to make decisions about your healthcare
If no one has a power of attorney, your family will have to go to court to handle straightforward estate matters if you pass away. Lastly, decide if you want to assign a springing power of attorney. It requires a doctor to declare that you cannot make decisions; hence, the authority falls to the person appointed. Depending on your choice, update the documents because officers hesitate to accept an older form.
3. Build a Trust for Your Children
Depending on the value of your estate, consider establishing a trust for minor children. It is precisely for people who are suffering from a life-threatening illness and have dependents. The trust will enable you to dictate when your children can use the inheritance for expenses like tuition fees, medical costs, rent, etc.
The appointed trustee will manage the funds for your child while making distributions for your child’s benefit. You can open this trust separately or incorporate it into your family’s estate planning, safeguarding your children’s financial future.
4. Utilize Annual Tax Exemption
Estate planning comes with a tax burden. One way to avoid estate tax is to give away all the assets when alive. The annual gift tax exclusion enables people to give up almost $16,000 per person annually without accounting for taxes.
If you want to give a higher amount, file a general tax return. These gifts count toward your lifetime estate limit, so they should not exceed the annual exclusion. Let’s say you gave a $20,000 gift, whereas the lifetime exemption amount was $16,000; for the additional $4,000, you must pay tax and file a return.
Moreover, you can also make tuition payments directly to the educational institute or medical expenses to the hospital. It will allow you to care for your loved ones without triggering the tax authorities.
5. Update Beneficiaries
When people start a retirement plan or open an IRA, they must complete a few beneficiary designation forms. The same happens when you apply for life insurance; the company requests you to fill out forms. These forms determine who will inherit those assets without any reference to your Will.
Therefore, you must review and update these designations carefully. You can name your children, siblings, or even parents as beneficiaries. Further, you can avoid confusion by securing your retirement benefits and life insurance proceeds for your child. However, if you handle your estate planning to the trust, mention it on the beneficiary forms. In addition, ensure those designation forms identify the trust rather than your children as the recipient of assets.
6. Organize All the Paperwork
Most importantly, be on top of all your insurance policies, brokerage, and mortgage paperwork regarding estate planning. Ensure every document is in its place and plunge them into the estate-settling plan. Besides this, include your social security, health, and medical cards in the file. It should have the contact information of all your doctors and lawyers.
If you own any digital assets, such as bitcoin investments or other cryptographic assets, mention it in the estate plan. Organizing every document will give you ease of mind. Also, if you want to change the estate plan later, you can use these documents and get a new plan drafted. After organizing all the paperwork, inform your spouse or closest family member, so they can easily find them.
Final Thoughts
Estate planning strategies are mostly straightforward, but the lack of expertise in this area requires everyone to seek help from a lawyer. They can help establish trusts and draft Wills, which are vital to real estate planning. You must look into the paperwork, check for taxes, and keep the beneficiaries updated. After all, estate planning is more than just a one-and-done proposition. Your decisions today might not match the circumstances later; hence, keep updating the plan.