When it comes to estate planning, determining how to manage your health care in the latter years of your life, and your money and property after death, the keyword is planning.
The goal is to refine an estate plan into details that protect your assets in retirement and benefit loved ones when you’re gone, according to Forbes.
Four ways to improve your estate plan are to do periodic reviews of beneficiaries, have life insurance, avoid the tangles of probate court by establishing a trust, and leave a legacy by incorporating charitable giving.
The heart of estate planning is figuring out what will happen to your property when you die. Also key are decisions about children and their property, taxes, avoiding probate court, managing health care late in life and what happens to your body after death.
Four Ways to Improve Your Estate Plan
1. Review Beneficiary Designations
Many accounts can be passed on to heirs and loved ones without having to go through the sometimes costly and time-consuming process of probate court.
It helps to update beneficiaries every few years, especially after major life events like divorce, marriage or the birth of children or grandchildren.
2. Have Proper Life Insurance
One of the primary uses of life insurance is to protect against the loss of income in the event of an individual’s untimely death. The most important time to have life insurance is typically while you’re working and supporting loved ones with your income.
This can still be the case in retirement. If one spouse creates most of the retirement income through Social Security, work, a pension, an annuity or other income, it makes sense to keep life insurance in order to provide for the surviving spouse or dependents after a spouse’s death.
3. Avoid Probate with Trusts
While almost everyone will need a will at some point, the same is not always true about trusts. Setting up a trust to control assets might be unnecessary if the individual has limited resources. As an individual’s estate planning needs and assets increase, the value of a trust also increases.
There are two main types of trusts: revocable and irrevocable.
A revocable trust is a trust you can rewrite the terms of as much as you want, according to U.S. News & World Report.
When you form an irrevocable trust, you relinquish control to the trustee. The grantor — you — can’t step back in and change the terms of the trust or fire the trustee without getting the approval of everyone involved, including the beneficiaries. For the most part, what's done is done.
The decision for you as grantor then is how much control you need over the trust. The more control you have, the fewer immediate benefits you have. The less control you have, the greater the potential benefits down the road.
As the Forbes states, you can fund revocable trusts with assets and still use the assets today without changing their income tax nature. These types of trusts function as a more effective way to pass on assets outside of probate and allow a trustee to manage assets for beneficiaries.
4. Incorporate Charitable Giving
Giving to charities is part of achieving true wealth, the freedom to leave a legacy to a church, alma mater, charity or other meaningful organization. This giving can be built into your estate plan.
Contact Hocker & Associates law firm in Indiana today for ways to improve your estate plan.