What Parents Need to Know About Estate Planning | S$M (2024)

FAQs

What are the 3 main priorities you want to ensure with your estate plan? ›

In conclusion, when creating your estate plan, it's crucial to prioritize these three key objectives: naming a trusted individual to handle your affairs, ensuring your estate goes to who you want it to, and protecting and maximizing your estate for your heirs.

A will or trust should be one of the main components of every estate plan, even if you don't have substantial assets. Wills ensure property is distributed according to an individual's wishes (if drafted according to state laws). Some trusts help limit estate taxes or legal challenges.

Key Takeaways

Common estate planning documents are wills, trusts, powers of attorney, and living wills. Everyone can benefit from having a will, no matter how small their estate or simple their wishes. Online estate planning services offer basic packages for less than $200.

Per stirpes.

One of the simplest strategies for asset distribution among heirs, this method requires that the estate be divided equally among each branch of the family. So, if an heir (a child) should pass away before the parents, their share would be passed along in equal shares to their heirs (the grandchildren).

Estate planning is all about protecting your loved ones, which means in part giving them protection from the Internal Revenue Service (IRS). Essential to estate planning is transferring assets to heirs with an eye toward creating the smallest possible tax burden for them.

A good estate plan consists of many different components, including what happens to your assets and who should act on your behalf if you are unable to. At a bare minimum, there should be two main components: a last will and testament and a durable power of attorney.

Simply put, an estate plan is a broader plan of action for your assets that may apply during your life as well as after your death. A will, on the other hand, dictates where your assets will go after you die, who will be the guardian of your children and more.

The Hardest Part of Estate Planning: Sharing the Plan.

It is important to create an estate plan to ensure that your affairs will be managed according to your wishes. An estate plan can also help reduce the burden of taxes and other costs on your loved ones after you are gone.

Without a will within your overall estate plan, no one will know exactly how you wanted your property distributed or who you wanted to watch over your children. That means state law (e.g. probate court) may dictate both of those things.

What are the most important legal documents? ›

In an emergency, it's crucial to have a few essential legal estate documents readily accessible, such as a Last Will and Testament, Advance Healthcare Directive, Durable Power of Attorney (aka Financial Power of Attorney), and Living Will.

Financial security for your family is perhaps the most important objective of a well-devised estate plan. It ensures that your family has the funds it needs, there are no delays in transferring assets to them, and there is enough liquidity to pay settlement costs, taxes and debts.

Ask what their plans are and what you need to know

As you start the conversation about your inheritance, it can be beneficial to first address the topic of what plans your parents have already established and if there is anything they want you to be responsible for when they die, such as locating documents.

Many financial advisors would recommend starting an Estate Plan the moment you become a legal adult, and updating it every three to five years after that.

If you want your assets and your loved ones protected when you can no longer do it, you will need an estate plan. Without one your heirs could face big tax burdens and the courts could designate how your assets are divided—and even who gets to raise your children.