After Your Funeral, Your Financial Assets Could Haunt: Estate Planning Basics

Inevitably, talks around
planning will lead to talks around estate planning. While these are not the most enjoyable of conversations to discuss in depth, they are an essential part of planning for your unavoidable future. Although estate planning is not a prerequisite to death – not much is – , having your estate clearly defined and your wishes preserved in great detail will make your passing that much less burdensome to your descendants.
If the difficult talks are not done in your lifetime, the talks will still have to happen once you are gone. Unfortunately, without your presence or your documented wishes, all your earthly possessions will still be inanimately there, and your family will still be in charge of disbursing your

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Prepare Yourself Mentally

It is important to keep in mind that despite the loss your family will have suffered upon your departure from this world, the state has no such emotional attachment to you. Death -- like marriage, divorce, tax evasion, bankruptcy or foreclosure -- has no sentimental impact on the state; therefore, the legal implications of your death may appear cold, harsh and ultimately offensive. This is not a personal attack against your memory, nor is it personal in any way. Yet, after you are gone, these emotions may
logically creep
into the minds of your loved ones. While you have no control over how your family will emotionally react after you have died, there are a few things you can do while you are alive to ease the legal pain that often follows every death.

Understand The Terminology

One way you can ensure that these post-mortem discussions and dealings are no more painful than they have to be is to establish a plan for your estate so your family can avoid
Unless you have closely dealt with the death of a loved one yourself and taken part of the estate-bequeathing process, chances are the legal language may be recognizable, but vague. Understanding the different terms that will arise when planning your estate will help the conversation flow smoothly. These conversations are emotionally charged and if basic familiarity is not there, the talks become frustrating, exasperating and unproductive.
A will is a legal document that states who you want to get what. While wills and trusts function similarly once you are dead and both can exist without the other, there are things wills have power over that trusts do not, just as there are limitations to wills. Wills are
public documents
, and therefore can be accessed or contested by anyone. Wills are also subject to probate.
Living Trust:
A trust is like a small business; it is just an empty shell until you fill it with things. It works while you are both alive and after you are gone. Your will works in tandem with your trust, pouring your assets into the trust. Your trust outlines instructions to your trustees, and the instructions are then passed to your heirs. Living trusts are
private documents
, and assets protected by a living will are not subject to probate.

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Health Care Directives:
Health care directives spell out how you want your health dealt with in case you reach the point where you are unable to make medical decisions for yourself. A
living will
can function as a health care declaration, and you can designate a power of attorney for your health care separate from your financial power of attorney.
Financial Power Of Attorney:
A financial power of attorney is a designated, trusted person you name to have authority over your finances and property if you are incapacitated or otherwise unable to manage them.
Beneficiary Forms:
Beneficiary forms are detailed descriptions of who you designate as your heirs. These list not only the beneficiaries' names, but other legal identifiers (such as social security numbers, dates of birth, and legal aliases) in order to ensure that after you are gone there is no mistaking who you alluded to in your estate documents.
Estate Taxes:
Taxes that are owed to the government upon your death. The size of the estate amount determines the taxation. For 2015, if an estate is less than $5.43 million, no estate taxes are owed.
A legal process that exists to safe-guard your possession after your death and guarantee that your property goes to the appropriate parties. It is expensive, emotional, time-consuming and can bring out the worst in everyone involved. Because it involves legal intervention, probate comes with a hefty price tag, paid for by the deceased's estate. The legal bills, therefore, cut into the estate and chisel away from what would otherwise
go to heirs

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One Very Large, Frequently Overlooked Asset

For as much time and energy are put into homeownership, bequeathing homes often gets overlooked when planning how to most efficiently pass on property. As US News contributor Philip Moeller stated, “For financial and emotional reasons, our homes often are the most valuable asset we own. Buying a home, making it your own, and enduring the ritual of paying down a mortgage are significant life events.”
“Yet for all the work we do to acquire and maintain our homes, we often don't devote very much time to figuring out the best ways to pass on this asset to our heirs,” Moeller concluded.
Leaving your home to heirs – and avoiding probate – is typically accomplished one of three ways:
1. Trust:
Document your home as one of the assets in your trust, designating to the trustees that it is passed to your heirs at the time of your death. Make sure you
understand the extent
of your trust, as each functions uniquely.
2. Deed It:
During your lifetime, you can deed your home to your heirs and retain a
life estate
3. Joint Ownership:
Similarly to outright deeding, you can establish a joint deed that legally lists your heir(s) and yourself a joint owners of the property. At your death, the living owner of the deed will legally own the home.
In order to avoid paying legal fees or other taxes, estate planning is highly recommended. With the proper documentation in place before you die, you can help ensure that your heirs get the maximum amount of your estate and minimize outside gain from your death. Take the time today to invest in the future of your financial assets and educate yourself on estate planning. As with all things financial, the more you know, the more control over your own situation you have.
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