Many people find the process of creating an estate plan intimidating. While that is understandable given the magnitude of the task, you must have a solid estate plan in place to safeguard your family should the unthinkable happen.
According to U.S. News & World Report, creating a reliable estate plan requires taking certain steps. Here are a few ways you can ensure a successful process.
Make sure you have a legally binding will
Wills are the cornerstones of virtually all estate plans. While most estates are subject to probate, which is the process of paying creditors and dispersing assets, a valid and legally binding will ensures probate is fast and efficient. A competently created will also reduce the risk that your family will contest your estate plan in court.
Consider establishing a trust
Despite popular misconception, trusts are not only beneficial to the very wealthy. They are also a great addition to your will, as they provide greater control over how heirs receive your assets. For example, you can set up a trust to dispense assets over a certain period instead of in one lump sum. You can also require the recipient to complete some goal, such as graduating from college, before receiving their inheritance. Trusts even allow you to bypass probate, as assets will pass directly to heirs when you die.
Do not forget beneficiary designations
While wills and trusts are essential estate planning tools, you cannot forget about your beneficiary designations. Beneficiary designations attach to life insurance policies and retirement accounts. They list the name of your heirs, as well as how much of your assets you want them to receive. This information supersedes the information contained within your will or trust, so you must ensure accuracy.
It is best to update your estate plan after any major life changes, such as a new marriage or divorce. However, you should conduct a review once every three years or so to ensure your estate plan continues to meet your needs.
