Throughout your life you have worked hard to earn what you now have. But since you won't be taking any of these hard-earned possessions with you when you die, it is important to plan your estate so that you can decide who will inherit what and how. However, estate planning is not just for dividing up your possessions; it also helps you to manage the final years of your life and to reduce the burden your loved ones might experience. As you go about planning your estate, you'll want to avoid making these four mistakes.
1. Not designating powers of attorney.
During the final years of your life, you may become unable to take care of your financial obligations. Yet, you will still be responsible for any fees or penalties that occur from not making payments, despite being mentally or physically unable to do so. Visit your local courthouse to see about designating a power of attorney to take care of your finances on your behalf, and to designate a medical power of attorney. A medical power of attorney will carry out your wishes as they pertain to your healthcare if and when you are unable to make the decision for yourself.
2. Not setting up a trust.
For many people, setting up a will is all that is needed to bequeath your possessions to loved ones. There are many others, however, whose families have to pay huge fees for a court probate process so they can fulfill and satisfy the will. Hire an attorney and establish a living trust of all your assets. With a trust, your family will be able to avoid the court probate process, along with any fees it may come with.
3. Not writing a letter of instruction.
A letter of instruction is a document separate from your will that helps to clarify and expound upon your wishes and designations. Being an informal document, the letter of instruction is also an opportunity for you to leave a more personal and familiar message to all of your beneficiaries.
4. Not giving away your possessions.
Estate taxes can be enormous, making for a greater burden on your heirs. To help reduce the taxes on your loved ones, give each beneficiary a portion of what you had already planned on giving them after you die. Now, having far fewer possessions, update your declarations on your estate documents. This will make your estate much less of a tax burden without short-changing your loved ones of any of your possessions.
The biggest mistake you could make when it comes to estate planning is to never start. Even by just researching how to plan your estate, possibly with the help of a professional like Cormac McEnery, you are well on your way to setting up a generous inheritance for your loved ones.