Estate planning is an important process that allows you to dictate what happens to your assets in the event of your death or incapacity. While it may seem morbid to think about, especially if you’re young, it’s never too early to start creating an estate plan. Planning ahead will ensure a smooth probate (or probate avoidance) process for your loved ones and beneficiaries, and it may give you peace of mind knowing your wishes are clearly documented if something were to happen. To get started with your estate plan, follow these six steps.
1. Identify and record all your assets.
Your assets include tangible and intangible items. Tangible assets are assets that can be measured physically, such as any furniture or furnishings or other items in your home, your car, or any work tools or equipment you own. Intangible assets are not physical and may include any business licenses, trademarks, digital (social media) assets, or intellectual property you have.
2. Consider risks to assets.
Certain assets come with risks. For example, if you own a home and you have overdue mortgage payments and property taxes at the time of your death, your estate will need to have sufficient funds to settle those debts. Take a look at your asset list and consider what you can do to mitigate risks that could come from them.
3. Protect your loved ones and name your beneficiaries.
There are several estate planning arrangements you can put into place to ensure your family and loved ones are provided for in the event of your death. If you are a single parent of minor children, you’ll want to appoint a legal guardian and set up a trust plan (as part of a Will or separately, depending on your goals) in order to provide financial security for them until they reach adulthood. Even if you are married to your child’s other parent, it’s a good idea to name a successor legal guardian to your spouse in the unlikely event that both you and your spouse die before your children have turned 18 years of age.
This is also a good time to think about what assets you want to be passed on to your family and friends. Go down your list of assets one by one and decide on your beneficiaries. Some individuals choose to leave their entire estate to their spouse and children, while others divide up their estate and leave certain assets to specific heirs.
4. Choose your power(s) of attorney.
Choosing an agent or attorney-in-fact to administer your financial and medical powers of attorney (POAs) is one of the most important parts of the estate planning process. Your agent should be someone you trust to make the best decisions on your behalf, as they will be responsible for your financial and medical decisions should you become incapacitated or are otherwise no longer able to make these important choices for yourself. You can use the same person (your spouse, for instance) or different people to serve in these roles, or perhaps name co-agents depending on your goals.
5. Review local and federal estate tax laws.
If you have a particularly large estate, your executor may be responsible for paying federal estate taxes. To help ease the burden of these expenses, your estate plan should include a review of current federal estate tax laws to determine your estate’s liability. Depending on where our beneficiaries reside at the time of your death, you may also want to brush up on the state inheritance tax laws where your beneficiaries reside. While Virginia does not impose inheritance taxes on residents who live in Virginia when they inherit, a handful of other states do.
6. Hire an estate planning attorney to help.
Due to the complexity of estate planning, it’s always wise to contact a professional for help. To get started with your estate plan or update your current plan, contact the Law Office of Patricia E. Tichenor, P.L.L.C. Our firm has nearly 20 years of experience helping Virginia families with creating and updating their estate plans.