According to a 2011 survey by EZLaw.com, only one-third of Americans actually have a legally-binding will. Although people aren’t necessarily comfortable with the topic of death, it’s important to plan your estate. Making a decision of your assets in case you die will not only help your family through this difficult process but will also ensure that your estate goes to the designated people. In this guide, we will go over our top recommended six tips for planning your estate, from obtaining life insurance to consulting a financial planner.
1. Consider Obtaining Life Insurance
Although you can usually skip buying life insurance if you don’t have anyone to support or if you don’t have enough money for it, often enough you’ll need it to cover your family’s expenses when you can’t afford to. In order to figure how much life insurance you need, estimate how long and what amount of money it would take to pay off your debts and fund certain savings goals. Not what you have that amount, divide it by five percent to determine how much life insurance you’ll need.
2. Make a Will
Passing away without a legal will prevent your assets from going to the people you want them to. Usually, it only costs about $70 to do it yourself, but a lawyer will set you back thousands of dollars if you want someone else to do it for you.
However, make sure you backup and update all of your documents per your will due in the case of major events in your life, such as the life of death of another person. If you fail to do so, you could have complications with your will.
3. Pick an Estate Administrator
An estate administrator is a person that’s responsible for following your will when you pass. It’s crucial that you pick someone that’s both in a good mental state and responsible to make good decisions on behalf of your will. In any case, you don’t have to immediately choose your spouse as your estate administrator, since their emotions can affect their decision-making process.
4. Consolidate Your Finances
It is very likely that you have worked at multiple jobs over the past years. This means that you may have more than one 401(k) or other retirement accounts open with previous employers. Typically, the worst this can cause is a little bit of additional paperwork and account management. However, consolidating these accounts into one individual IRA can have serious benefits. Doing this can provide better investment options, a larger variety of investments, reduced costs, less paperwork, easier management, and greater control. All of these are compelling reasons why you should think about consolidating your retirement funds.
5. Look Over and Update Documents
Review your will and make any necessary changes at least once every two years, if not more frequently. You should also update your documents after major life changes like births, marriages, and divorces. Life is always changing and so will your inventory list. So make sure you update documents when you need to.
6. Consult an Estate Attorney or Financial Planner
Even if you think you have everything covered, you may still want to meet with an estate attorney or a financial planner. You should have a full investment and insurance plan made up at least once every five years. When you age, your life changes. You may suddenly find yourself needing long-term care insurance or something of the like. An expert can help when these large life changes come your way. They can offer advice and guidance on everything, no matter how large or small. Consulting with a finance or estate professional is well worth the investment.