4 tips for effective estate planning
You have built wealth throughout a lifetime, but what will happen to all that once you have passed away? Once you have entered the later stage of your life, you will have to determine how you are going to distribute and preserve your assets for the next generation.
Estate planning isn’t something you will want to overlook, especially if you have saved large amounts of money and properties over the years. It’s not just about giving away your possessions. For the most part, estate planning is all about leaving a lasting legacy.
The process can be challenging, as you will need to tackle several legal hurdles before your loved ones can enjoy the fruits you will be leaving behind. For that, here are a few tips you might want to check out:
1. Set your goals
You can do estate planning long before you enter retirement. Many financial advisors suggest starting estate planning as soon as you enter adulthood. That way, you already have a plan in place in case something happens to you. Life is full of surprises, so it pays to write your last will and identify who is going to inherit your possessions. Be sure to update your estate plan every three to five years or whenever you reach a major phase in your life.
2. Get a financial advisor
Estate planning isn’t just about writing a Will and designating a Power of Attorney in case you are unable to make decisions on your own. It also involves getting a financial advisor who can walk you through the process and ensure a smooth (and less costly) transfer of assets to your next of kin. Many financial planners specialize in cash flow management financial planning for businesses, but they also offer estate planning services that fit your needs.
3. Create a trust
Do you own a real estate portfolio? Do you have at least $100,000 in assets? You wouldn’t want to let your wealth go to waste or let your loved ones pay taxes on the things you leave behind. For this reason, consider creating a Trust. This entity helps transfer your assets privately to a designated inheritor. You have options for a revocable or irrevocable trust, but make sure to talk to your family lawyer and financial advisor before finalizing your decision.
4. Know what taxes are required
Since you are passing on your wealth to the next generation, your inheritors could end up paying taxes on assets they couldn’t even afford to keep. Without taking taxation laws into account, your loved ones could lose their inheritance. For this reason, you should know what federal and state taxes are due on your estate before it’s distributed among your beneficiaries. One of the strategies you can do to reduce estate taxes is to give a portion of your estate as a gift to family members or a donation to a charitable organization. Doing so will help ease the financial burden your loved ones will have to face after your passing.
Proper estate planning will help you preserve your legacy and ensure that your loved ones enjoy the best of what you have had.