As you approach your senior years or as your estate grows, you will want to make sure that things are clear in terms of your assets. With estate planning, you can name who has your assets and set up a basic plan in relation to your net worth. It can be both difficult and a rather morbid task to do, and no one wants to think about their death let alone who gets what when they die.
The important thing is that you won’t let your assets go to waste, and you can decide who or what entity gets what remains after you’re no longer here or able to make financial decisions. Estate planning is a way in which you plan for the future; not your future, but the future of your friends, family, and other loved ones. It’s a financial decision that you simply have to make.
Creating an estate plan is the last step to your financial well-being. Although it is not for you personally, the plan will have an effect on the people that are closest to you. If you want to learn how to deal with your finances, including your estate plans, check out the Udemy course Personal Financial Well-Being.
What is Estate Planning?
Estate planning, as mentioned before, is simply deciding where your assets go right after you die. It can be a complicated affair, and it’s important to get a financial adviser and even a lawyer when you want to create an estate plan.
No matter what your net worth may be, everyone should have an estate plan. It’s a common belief that only people who have a lot of items and assets should create an estate plan, but that is not the case. Everyone has an estate, whether it’s their home, their car, or other personal belongings of value. With an estate plan, you get to name everyone who gets your assets, and whatever you wish is legally binding, which means that no one can make the decision for you or change it for you.
The key benefit of an estate plan is you will know that you won’t leave your loved ones stuck with the burden of dealing with administrative issues and problems after your life.
This is an important aspect of financial planning, but it is not the only one. If you want to be prepared for your unexpected departure and remove the financial burden from your family, check out this Udemy course, 5 Ways to Jumpstart an Emergency Fund.
Creating Your Estate Planning Checklist
Now that you understand the importance of estate planning, you may want to start creating one now. Although many people wait until they reach old age to make an estate plan, it is important to create one just in case. You never known when something may happen, and it’s important to have a plan sooner rather than later. It’s especially vital for you to create an estate plan if you have a family that you want to take care of after your passing.
There’s a laundry list of things you will need to create an estate plan that isn’t just well thought out, but is also legally binding.
Everything You Need for Your Estate Plan
The first thing you need to do is make an inventory of all of your items. There are two types of items you want to do inventory for: your physical items and your non-physical items. Your physical items will include everything inside and outside of your home that is worth over $100. This includes your home, computer, vehicle, various collectives, television, etc. Your non-physical items include things that aren’t tangible, but have a monetary value. Think of your 401k plans, bank accounts, life insurance, and other policies that will come into play after your passing. It’s important to get a proper list of all of your assets no matter how large or small in order to create a complete estate plan.
- Make a list of your credit cards and other forms of debt. You want to make sure you clear your debt in your estate plan in order to remove the burden from your family. Always stay up to date on your credit and debt situation, and run a credit report once a year in order to make sure that you don’t have any credit cards open that you don’t use anymore.
- After you’ve gathered all of your assets, you should make a will. Your will names everyone who will inherit your property, the guardians that will care for your children on the off chance that you and the other parent have both lost their lives or are unable to take care of the child.
- Once you’ve created your will you need to make someone your financial power of attorney. This is a trusted person that you will give complete authority over handling all of your finances and properties in the event that you become unable to handle them yourself, such as if you became incapacitated.
- Another important step is to make sure that you assign a transfer on death designation for your accounts. Many of your accounts get probated daily. A probate is a court process that can become very costly. Instead of dealing with these costs, you can use the transfer on death feature to completely avoid this process. In order to set this up, all you have to do is call your bank and set this up.
- Once you’ve created your will, and set up your arrangements of where your funds and assets will go after your death, you will need to manage your documents regularly. Update your will, at least once every two years in order to keep things on track. Remember that you should also make three copies of these documents. The first copy will be sent to your lawyer, the person who has the power of attorney over you. The second copy will be given to your spouse or significant other. The third copy of your documents you will keep to yourself and keep it in a safe place. There are several documents that you need to keep track of, so keep an organized list of everything.
The Benefit of Estate Planning
The biggest benefit that comes with estate planning is complete peace of mind. It’s hard to think about your own mortality, but it can be even worse when you think about the situation your loved ones will be left in after you’ve passed. If you’re the sole provider of income in your home, then it’s vital that you create an estate plan. Although it may not be the most fun thing to do and it can be a difficult thing to consider, your death and how your family will fare without you, it is an important aspect of your life that you should never ignore.
Creating an Estate Plan that’s Inexpensive
One of the biggest fears people have is that creating an estate plan can cost a great deal of money. Handling where all of your assets go, hiring a lawyer, and getting a financial consultant can all be a financial burden on you.
If you believe that creating an estate plan would be too expensive, create one that’s affordable. Although you may not have a 401k, and a life insurance policy, you can still give power of attorney to someone close to you, set up a life insurance policy, and create a legally binding will in order to prepare for the worst.
Creating an estate plan is an aspect of personal finance that you will constantly deal with throughout your life. If you have problems with personal finance check out these finance tips to help you keep debt low and prepare for the future.
Keep Things Organized and Let Your Family Know What’s Going On
Another of the big benefits of estate planning is complete organization. State planning requires you to keep everything, from your bank accounts to your debt levels in check. You have to constantly check what your credit level is as well as where all of your funds are designated at any given time. This also gives your family a peace of mind and level of security knowing that whatever may happen to you, they will be able to instantly prepare themselves financially for your loss.
As mentioned above, you should always give a copy of your estate plan to your significant other so that they know what’s going to happen in the event that you lose your life or you become incapacitated. An estate plan is an essential way for you to organize your assets, your funds, and the future of your loved ones when you may one day pass.
One Udemy course that will help you keep up with your finances and organize your budget is the Personal Finance: Thinking Like the Rich and Acting Now course. This course does just as the name suggests. It teaches you how to think like a successful person and plan accordingly.
When Should You Create an Estate Plan?
There’s no perfect time to create an estate plan. As mentioned before, you may not feel that you’re ready, or that you need to create an estate plan right now, since you don’t have many assets or you may not have many responsibilities, but you should always prepare for the worst, and you should have a plan in place for those just in case moments.
You never know what tomorrow will bring, and being prepared with an estate plan will leave both you and your family at a peace of mind. Even if you have a relatively small number of assets, you can still create an estate plan to help organize and deal with the cost of things such as your funeral.
No Matter What You Think, Estate Planning is for You
It cannot be stressed enough how important it is for you to establish an estate plan. Everyone needs one, especially if you have a family or loved ones that rely on you in order to get by. Being prepared financially is a large part of being responsible, and your financial responsibilities will continue even after your passing. Dealing with it sooner rather than later will be beneficial to everyone.
This is an aspect of personal finance that everyone should follow. Check out the Common Cents Personal Finance Udemy course, which teaches you all about the financial decisions you should make in your day to day life.