Tuesday, 1 September 2015

Checklist: Components that Constitute a Good Estate Plan

Investopedia.com defines estate planning as “the collection of preparation tasks that serve to manage an individual’s asset base in the event of their incapacitation or death, including the bequest of assets to heirs and the settlement of estate taxes.”

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Estate planning encompasses plenty of factors and must be started as soon as one acquires a substantial amount of assets such as bank savings, properties, jewelry, and other investments. As people age and goals change, estate plans must be redesigned to satisfy new demands. Poor or inadequate estate planning can lead to financial burdens to loved ones; estate taxes, which could be as high as 40 percent, still apply even after the owner dies. Regardless of the estate’s size, one has to carry out effective preparation.

The following are the most important components of or tasks that must be accomplished in estate planning:

  • Creating a will
  • Assigning a guardian for living dependents
  • Managing estate taxes by setting up trust accounts for the beneficiaries
  • Naming an executor of the estate to oversee the terms of the will
  • Frequent gifting to qualify for the annual exclusion from federal gift taxes
  • Buying IRAs, 401(k)s, and life insurance; the policy benefits can be used to pay off the estate tax
  • Establishing a durable power of attorney (POA) to direct other assets and investments
  • Setting up funeral arrangements

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Washington-based Linda O. Foster advises her clients on how to reach their financial goals and enhance their estate plans by offering tax-advantaged low-cost investment options. To arrange an appointment with her, click here.