Estate Planning 101: How to Get Started
Disclaimer: This blog is for informational purposes only. Please consult an estate attorney for guidance tailored to your individual circumstances.
Despite what many believe, estate planning isn’t just for the wealthy. It’s about making sure your wishes are honored and your loved ones are taken care of, regardless of the size of your estate. Without a plan, the decisions about where your assets go are often left up to the state. Getting started with estate planning now can save your family a lot of hassle in the future. Like how AutoPayPlus helps you manage your debt, an estate plan is just one more way to take control of your financial future. Here’s a basic overview of estate planning to help get you started:
Start by Understanding What You Have
The first step in estate planning is understanding your financial picture. Beyond the money in your checking and savings accounts, this involves creating a list of what you own and what you owe.
Think about your assets, including:
- Real estate property
- Vehicles
- Personal possessions and collectibles
- Life insurance policies
- Retirement plans and investments
- Ownership of a business
Think about your outstanding debt, including:
- Loans
- Credit cards
- Medical bills
- Other liabilities
Knowing the full scope of your finances gives you a good starting point when planning your estate. As an AutoPayPlus Member, you have a head start in understanding your outstanding debt. Since you’re already actively working on paying it down through our automated payment plans, you can be debt-free before your estate is passed on to your heirs. This means debt doesn’t have to be subtracted from your estate and your loved ones can receive their full inheritance.
Consider Writing a Will and Establishing a Trust
Now that you know what you have, it’s time to decide how you want it to be distributed. A will allows you to outline who gets your belongings and who will care for children or dependents after you’re deceased. Many wills go through probate, which is a court process that can cost lots of time, money, and stress.
A trust, on the other hand, is managed by a trustee and gives you more control over your assets and how they’re distributed. For example, you can create stipulations, like “this beneficiary gets half of their inheritance at age 25 and the other half at age 35.” Trusts can also help your loved ones avoid probate and offer certain tax advantages. A major difference between wills and trusts is that wills are executed after you die, while trusts can take effect while you’re still alive and continue after your death.
Both have their benefits, but the details can get complicated. To help you sort through it, consider speaking with an estate attorney.
Choose Who You Want to Handle Things on Your Behalf
Choosing someone to handle various aspects of your estate is one of the most important decisions you’ll have to make, and it’s important to choose people you trust. There are specific roles that dictate who can make certain decisions.
- Executor: Carries out the wishes you leave in your will.
- Trustee: Manages and distributes the assets in a trust according to your instructions.
- Power of attorney: Makes financial or legal decisions on your behalf if you’re unable to.
- Healthcare proxy: Makes medical decisions on your behalf if you’re incapacitated.
Review Your Beneficiaries
Certain accounts, like life insurance, retirement plans, and most bank accounts, allow you to name a beneficiary. This is the person who will automatically receive the money or investments in the account upon your death. It’s important to note that designated beneficiaries can override what’s in your will. For example, when you created the account, you may have named your spouse as the beneficiary. If you’ve since been divorced, unless you change the beneficiary, your former spouse may inherit the account, even if your will says otherwise. It’s a good idea to review your beneficiaries every couple of years or after major life events to keep them up to date and avoid complications.
Understand the Tax Implications
When planning your estate, keep in mind the tax implications. Depending on the size of your estate and the state you live in, your estate may be subject to federal and/or state taxes upon your death. Certain states also have inheritance tax, which requires your heirs to pay taxes on the assets they inherit. Planning ahead can help you avoid or minimize some of these taxes, easing the burden on your heirs, but this process can get tricky. That’s why it’s important to consult with an estate attorney or a tax professional.
Getting Started is the Most Important Step
While this may seem like an overwhelming amount of information, the important thing isn’t for you to understand everything or get it all done at once. The important thing is to take small steps now to lead you in the right direction. Estate planning is only one piece of planning for your future. Paying down debt is another piece that protects your estate and your loved ones. With accelerated bi-weekly payment plans from AutoPayPlus, you can be debt-free sooner, allowing you to focus on leaving more to your loved ones. Get started today by scheduling a consultation with a Payment Concierge.
