Fear of the unknown and a deep concern for the well-being of one’s children can make estate planning and providing for their future a nerve-wracking experience. No matter how you dispose of your estate and how carefully you make arrangements, it’s hard not to second-guess yourself and wonder if you’ve done the right thing. People often don’t know where to begin or how to invest prudently. For many people, their ability to distribute available wealth is rooted in the value of their home. It’s important to know your home’s value when planning for your future. Financial advisors teach that it’s best to begin with the basics, to make sure you have a will that names an executor for your estate and guardians for your children if they’re minors when you pass.
A will details exactly how your estate will be divided among your heirs and should leave no ambiguity or confusion as to your intentions. Many people hire an attorney to draw up a will for them, though there are plenty of resources available online to help you do it right.
You may need a life estate deed if your children are of adult age. Such a document provides for the legal transfer of your property to others when you die. It may be worth hiring an attorney for drawing up a legal transfer because it’s essential that it be written clearly, leaving no uncertainty as to your desires.
A life insurance policy provides your family with a financial safety net should you die unexpectedly. It helps your loved ones pay for the expense of a funeral and continue to live as they have. One of the most valuable services a life insurance policy provides is to relieve your loved ones of difficult decisions and financial burdens arising from your death, funeral or loss of income. You should also consider getting policies for each of your dependents so you are protected financially in the event that one of them should pass away unexpectedly.
Savings and investments
Setting up savings account for your dependents is a great way to provide for their futures and to teach them the value of saving money. Banks and other financial institutions often offer low minimum balances, reduced fees, and joint account ownership. One of the best ways to save for your children’s future is to set up an education savings account or a 529 College Savings Plan, which offer sizable tax savings. Withdrawals can be made up to $10,000 tax free for tuition expenses. Some states offer tax deductions for contributions to a 529 college savings plan.
There are safeguards in place that protect your investment. For example, as the fund owner you maintain control; the beneficiary cannot access the money for any other purpose. It’s also a convenient way to grow an education fund because most plans will allow you to tie it to a bank account, so that contributions are made automatically. And there are no contributions or income limits, which means anyone can open a 529 fund.
If you’re concerned about saving for the future only to have the money frittered away irresponsibly, a trust can help ensure that any money that goes to a beneficiary is allotted in installments over a period of time. As such, a trust offers certain advantages over a will, which designates money outright to your heirs. Trusts act as protection against bankruptcies and against the intentions of unscrupulous people trying to access money that doesn’t belong to them.
Having accurate information about your assets and financial picture is always necessary for making financial plans. Sensible and well-informed estate planning is essential for designating how financial resources will be allotted after you’re gone.
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