You might only fantasize about being a lord or lady when a certain period drama graces your screen, but you still have an estate to manage. Whether modest or grand, your earthly assets are just like those of Downton Abbey’s fictional family: you can’t take them with you.
Dodge real-life cliff-hangers with this estate-planning primer.
While these tips provide an introduction to estate planning, they’re no substitute for a real-life financial planner. Make sure you consult one before taking action.
1. Early Bird
Estate planning is not just for wealthy empty nesters. In fact, people with modest assets benefit significantly when they sidestep excess taxes and court costs. Those who are just starting to plan should focus on the basics: creating a will that names a guardian for any children, giving a trusted person financial and medical power of attorney, and securing life insurance. As your finances change, your vision can expand. Just remember that if you don’t have a plan in place, the state will pick one for you.
2. Gift Exchange
In 2014 estates totaling less than $5.34 million did not incur federal taxes. Those facing a large tax bill, however, can reduce it by gifting up to $14,000 a year to an individual ($28,000 if you and your spouse give jointly) or by covering someone else’s medical or educational expenses, as long as you directly pay the institution where the costs are incurred.
3. Single File
Putting all the important stuff—legal documents, employer benefit information, and contacts for your financial advisers—in one place is a great way to get started. You should also curate a secure list of passwords for electronic files, online accounts, and social media. Let your trustees know how to access this information.
4. Medical Care
Outlining your wishes regarding medical treatment will ease the burden on family if you can no longer give consent. These requests are laid out in a living will and address issues like resuscitation, ventilation, dialysis, organ donation, and palliative care. Additionally, you should name a healthcare proxy to act as your agent and enforce your instructions.
5. Expert Opinion
While you can draft a will by yourself, working with a qualified professional will help ensure your estate plan holds up over time. Find an attorney through referrals—your accountant probably has good leads—or contact the local bar association. Since this is such an important partnership, take the time to interview multiple candidates.
6. Paper trail
While a will is an essential document, it does not circumvent probate—the legal process that inventories the deceased’s property, pays debts and taxes, and distributes the remaining assets. In addition to a will, you can set up a trust to avoid the courtroom rigmarole. Since requirements vary, check your state’s laws.
7. Talking Points
An inheritance is a gift that often comes with a major catch: family drama. Prevent bitter feelings and confusion by having frank conversations about your intentions early on. Begin with one-on-one talks and then have a group meeting or video call. Don’t expect potential heirs to initiate the discussion; no one wants to come off as greedy.
8. Final Curtain
When the inevitable happens, expenses can pile up. To make sure cash is on hand for your send-off, consider setting up a Totten trust—an account that sidesteps probate and can be accessed upon your death to cover funeral expenses. Unlike prepaying a mortuary, you retain control over the money during your lifetime.
Article written by Megan Bingham Hendrickson