Estate Planning for the New Year - Your Most Important Resolution
By Don Drake, Connelly Law Offices, Ltd.
"As we approach 2024, it's really time to start thinking about your goals and resolutions for the upcoming year," stated professional fiduciary and certified elder law Attorney RJ Connelly III. "While many people tend to focus on health and fitness goals, such as joining a gym or beginning a daily jog routine, it is equally important to consider financial and estate planning goals. Estate planning can seem like a daunting task, but it is crucial to secure your future and protect your loved ones."
"Such planning is not just about planning for death. It is also about planning for life - including retirement, illness, disability, young children, college, and other important life events," continued Attorney Connelly. "If you aspire to retire early, it is essential to ensure that you have good disability insurance and adequate life insurance coverage in case of any unforeseen circumstances, and such planning is not just for older people, as many believe, but also for people in their prime years of life who are looking to secure their future. By planning for such life events, you can ensure that you have a solid backstop for your future early retirement."
An Important Resolution
Planning and organizing your estate is essential to ensure peace of mind and achieve your financial objectives. Therefore, resolve this new year to prioritize estate planning and take the necessary steps to secure your future. Here are some ways to achieve your goal:
Evaluate Your Financial Situation
To start organizing your finances, create a detailed inventory of all your assets and debts. This inventory will help you better understand your current financial situation and help you calculate your net worth.
When creating your list, consider including assets such as your bank and investment accounts, personal property such as jewelry, collectibles, and motor vehicles, any retirement plans you have, life insurance policies, and any real estate you own.
When listing your debts, include credit cards, auto, personal, student loans, and mortgages. Having a comprehensive list of your financial assets and debts can help you make informed decisions about your finances and future plans.
Update Your Estate Plan
If you have already created an estate plan, review and update it periodically, preferably at the start of each new year. Your life circumstances are continually evolving, and it is crucial to ensure that your estate plan reflects those changes. Take some time to consider any significant life events that occurred in the past year, such as the birth of a child, a death in the family, a marriage, or a divorce. These events can significantly impact your estate plan, so ensuring that your will, trust, or other estate planning documents accurately reflect your current wishes is essential.
If you have any doubts or questions about your estate plan, it is always a good idea to consult with a qualified estate planning attorney who can help guide you through the process. Remember, keeping your estate plan up to date can help ensure that your assets are distributed according to your wishes.
Review Any Trusts
One of the essential tools used in estate planning is trust. A trust is a legal agreement enabling you to hold and manage your assets while alive and distribute them to your beneficiaries after death. This tool is particularly useful if you have significant assets or complex family dynamics.
Trusts provide many benefits, such as offering more control over how your assets are distributed and protecting your privacy. With a trust, you can determine how and when your assets are distributed to your beneficiaries. This means you can create rules to ensure that your loved ones receive the funds when they are ready and mature enough to handle them. Additionally, trusts can help you avoid probate, which is a court process that can be lengthy, costly, and public.
A trust is an excellent option for anyone who wants to protect their assets and ensure their loved ones are provided for after death. It is a powerful tool that can help you maintain control over your assets and avoid probate, making it a smart choice for those with significant assets or complex family situations.
Review Your Will
Creating a will is crucial in ensuring your assets are distributed according to your wishes after death. A will is a legal document that outlines the details of how you want your property to be divided among your beneficiaries and assigns an executor to oversee the distribution process. If you do not have a will in place, the state law will determine how your assets are distributed, which may not align with your wishes. Therefore, it is vital to take the time to create a will that reflects your wishes.
The beginning of a new year is an opportune time to think about creating or updating your will. If you already have a will, review it periodically to ensure that it is up-to-date and reflects your current wishes.
Getting Ready to Retire
Consider retirement planning as a critical component of your overall estate plan. One of the most important steps you can take is to ensure you contribute enough to your retirement accounts, such as a 401(k) or IRA, and take advantage of any employer-matching contributions. This will help you build a solid foundation for your retirement years.
If you are nearing retirement age, have a well-thought-out plan in place for using your retirement funds. This may include creating a retirement income plan that considers your expected expenses, sources of income, and any potential risks. You may also want to consider long-term care options, such as purchasing long-term care insurance or setting aside funds for future care needs.
Another consideration is planning for potential healthcare costs. As you age, the likelihood of facing costly medical expenses increases. You may want to explore options for Medicare supplement plans or other healthcare coverage to help reduce your out-of-pocket costs. By taking a proactive approach to retirement planning, you can help ensure that you are prepared for the future and have the financial resources you need to enjoy your retirement years.
POAs and Advance Directives
It's a time to prepare for unforeseen medical emergencies with documents known as advance directives. These documents include a living will and powers of attorney, which can be essential if you cannot manage your affairs after a significant injury or illness.
A medical power of attorney enables you to appoint someone you trust to act in your best interest if you need medical care and cannot communicate your wishes. This person can talk to your doctors on your behalf about the treatments you would (or would not) want to receive. This document may also be referred to as a healthcare power of attorney in some states.
You can choose a trusted person to handle your financial matters if you cannot do so. For example, if you fall ill, you may want to focus on getting better rather than managing your bills. You can appoint someone to manage your financial tasks, such as paying your bills. This is known as your durable financial power of attorney.
These essential estate planning documents are among those that can help prepare you and your family for unexpected life challenges.
Sitting With the Family
Having an estate plan in place is vital to ensure that your assets are distributed according to your wishes after your death. However, it is not enough to have a plan in place. Having open and honest discussions about your estate plan with your loved ones is equally important. This can help avoid any misunderstandings or conflicts between family members after your passing.
Ensure that your loved ones fully comprehend your estate plan and know your wishes. Discussing your plan with them can help clarify any doubts or queries they may have. This can also help them understand your reasoning behind certain decisions, which can prevent any disagreements down the line.
Discussing the estate plan can provide an excellent opportunity to address any family dynamics or potential conflicts that may need to be dealt with in your plan. For instance, if you have children from a previous marriage, it may be wise to ensure that your current spouse is taken care of while still ensuring that your children receive their fair share of the inheritance.
Ensure that your loved ones know where to find your estate planning documents in case of your sudden passing and that your legal and financial documents are organized and in a safe and easily accessible place. Informing your loved ones about the location of these documents can ensure that your wishes are carried out as per your plan.
A Final Thought
"New Year's resolutions are often easier said than done," said Attorney Connelly. "In fact, statistics show that nearly one-third of people have already failed to keep their resolutions by February. So, contacting a qualified elder law and estate planning attorney near you can help you make progress toward achieving your resolution. With expert help, you can create a unique and personalized estate plan that meets your specific needs."
In 2024, having an effective estate plan guarantees that your loved ones are protected and your assets are distributed correctly. By preparing your estate plan sooner rather than later, you can have peace of mind knowing that you and your family are well taken care of.
Please note that the information provided in this blog is not intended to and should not be construed as legal, financial, or medical advice. The content, materials, and information presented in this blog are solely for general informational purposes and may not be the most up-to-date information available regarding legal, financial, or medical matters. This blog may also contain links to other third-party websites that are included for the convenience of the reader or user. Please note that Connelly Law Offices, Ltd. does not necessarily recommend or endorse the contents of such third-party sites. If you have any particular legal matters, financial concerns, or medical issues, we strongly advise you to consult your attorney, professional fiduciary advisor, or medical provider.