Estate planning can be a difficult subject to discuss with loved ones.
You may be perfectly comfortable talking about death, incapacity, and estate planning.
This does not mean your loved ones will feel the same way.
Thinking about mortality can be uncomfortable for many.
Taking stock of everything required when organizing an estate can feel daunting.
According to a recent MarketWatch article titled “3 tips for navigating estate planning with loved ones,” discussing your estate plan with loved ones is essential albeit awkward.
With everyone on the same page, you can simplify the settlement of the estate and minimize stress for your loved ones.
How can you start an estate planning conversation?
Underscore the benefit of peace of mind.
People tend to worry about their loved ones.
Unknowns bring up greater anxiety and feelings of being out of control.
By creating an estate plan, you and your loved ones can rest assured knowing you have minimized your tax liability and removed barriers to an efficient estate settlement.
Be honest and open.
Assumptions cause problems in estate planning.
You may think your family will not fight over your assets, but they might.
You may think your chosen executors, trustees, or guardians are willing to serve in these roles.
They might not.
It is important to explain the reasoning behind your asset distribution and outline the responsibilities associated with specific roles so your loved ones understand your plan.
Informing appropriate (trustworthy) parties of the location of your legal documents is also important to a smooth estate settlement.
Carefully select beneficiaries.
Who is listed as your beneficiary can have a significant impact on your taxes and the taxes of your heirs.
If your children are minors, creating and designating a trust as a beneficiary may the best option.
If they are older, this can cause problems.
Taxes may be triggered when an IRA is distributed to a trust, depending on its design.
These will be taxed before distribution to the beneficiaries and will leave less money for your heirs.
If you name your adult child as the direct beneficiary of an IRA, they will have more freedom in the actions they take with the money.
However, Kansas law does not protect distributions to non-spouse beneficiaries, but Missouri does.
Another consideration when you create an estate plan is the use of “transfer on death” designations.
These allow you to designate a beneficiary to these accounts and keep them out of the probate process.
In Kansas and Missouri, you can even make such probate avoiding arrangements for real estate.
By talking with your loves ones now about estate planning and working with an experienced estate planning attorney, you can rest knowing your affairs are in order.
Reference: MarketWatch (June 5, 2021) “3 tips for navigating estate planning with loved ones”