In the past year, the number of young adults who have created a will increased by 63%. What many young adults don’t realize is that a will is only one component of a comprehensive estate plan.
We tend to assume that our will establishes where all of our financial assets will end up after we pass. However, estate planning allows you to prepare for the distribution of assets now and at the time of your death. It also gives you a more comprehensive understanding of how distributing your assets will come to fruition.
The best estate planning tip we can offer is to think long and hard about who your beneficiaries will be and how you want to distribute your assets to them.
Read on to learn more about how to make these decisions while putting together your estate plan.
Common Beneficiary Choices
A beneficiary is an individual who will legally inherit your assets. When you don’t take steps to establish specific beneficiaries, the state will typically do so for you. By choosing beneficiaries yourself, you can guarantee that your assets will end up in the hands of those whom you’ve chosen.
Spouses or Partners
Spouses or life partners are some of the most common beneficiaries. In fact, some assets allow you to select a beneficiary directly, such as life insurance or retirement funds. It is highly common for people to name their spouse or partner as the beneficiary of these assets and others.
(Remember, if your spouse or partner passes away before you do, you will need to revisit your estate plan. Having additional beneficiaries in mind can ease this process.)
Children and Grandchildren
Another common beneficiary choice is the individual’s children and/or grandchildren. This includes children who are adopted or step-children. There are often specific laws regarding beneficiaries who are under the age of 18 that you will need to consider when putting together your estate plan.
Charities
Finally, many individuals will leave a designated amount of money or other assets to charities of their choosing. Under this umbrella, you will also find non-profits and universities, as well as institutions such as libraries and museums. For example, you may name a specific museum as the beneficiary of your valuable art collection, or you may leave these organizations money, directly.
Other Beneficiaries to Consider
Who you choose to be your beneficiary isn’t limited to familial lines. Take the time to think about who is most important to you and who you’d like to help financially. This may include close friends and colleagues.
Sharing Your Assets Now: What Are Your Options?
Some people choose to begin distributing their assets before they pass on. This is a useful way to reduce estate taxes. However, it is also important to keep in mind that you don’t know your own life expectancy, and you still need enough money to live on, yourself.
Common examples of distributing assets in the present include:
- Paying for education expenses and/or medical expenses of a beneficiary; by paying for these expenses directly to the institution, your beneficiary will not incur a gift tax
- Creating an education fund for a child or grandchild to use in the future
- Investing in the retirement fund of a beneficiary
- Donating a regular or lump sum to an organization or charity
Keep in mind that while these distributions may lower your estate tax, any gifts given to friends or family are not tax deductible. Gifts that are given to certain organizations, however, may be tax deductible.
Should You Set Up a Trust?
If you’re delving into estate planning, you’ve probably come across the concept of a trust. What is a trust?
A trust is a fund that is not subject to estate taxes and cannot be subject to probate. These are two of the biggest benefits of establishing a trust, but there are also very practical reasons you may decide that this is the best option.
When your money is placed in a trust, you can designate when and how that money can be used. The trust is then appointed to a trustee who will ensure that those wishes are carried out. Trusts are common tools used by individuals with extremely sizable estates or individuals who worry that their beneficiaries may not know how to use their assets wisely.
For example, trusts can be a great option if any of your beneficiaries are minors. You can make that money available to them when they become adults, establish its use for things like education or housing, and more.
Work With an Estate Planning Attorney
Quite frankly, there are a lot of moving parts that go into comprehensive estate planning. Not only do you need to designate individuals as your power of attorney, trustee, and so forth but there are also laws designating what and how you can use your assets. There are even laws designating how different beneficiaries can come to own your assets.
Needless to say, you shouldn’t go through the estate planning process alone. Head to Tate-lawoffices.com to find out more about how an estate planning attorney can show you how to plan your estate and protect your interests now and in the future.
Don’t Skip This Estate Planning Tip
Learning how to write a will is an important part of adulthood. However, estate planning goes beyond a will, alone, and naming all of your beneficiaries is a crucial part of estate planning. Don’t skip this estate planning tip and you’ll guarantee that your assets end up exactly where you intended.
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