Most of us don’t look forward to dealing with estate planning, regardless of our gender. But estate planning is even more important for most women since, in many cases, they live longer.
This means that women must manage living expenses on a single income, or no income at all, for a longer period of time than most men ever will. In many cases, women also earn less money than men, which creates a greater potential challenge.
Consider these important points about planning your estate:
- Everyone needs a will. It’s important to formalize your intentions regarding how you wish to have your property handled at the time of your death. If you die without a will (intestate), the state will be in charge of distributing your property.
- Choose a trustworthy executor. The executor of your estate will handle all of your financial matters until the taxes and debts are paid and the assets have been distributed according to the will.
- While many people choose a relative for this role, it’s wise to find someone with some financial savvy to serve as your executor.
- If your spouse dies, remember to revisit your estate plan. Most people plan their estate once and then never think about it again. But your estate plan was made based upon your situation at that time. Situations change and your estate plan will probably change, too.
- Consider a pre-nuptial agreement before remarrying. If you want to see a significant amount of your assets passed on to your children or grandchildren, it’s crucial to hire an attorney to draft a pre-nuptial contract that will limit your new spouse’s rights to your assets.
- State laws vary when it comes to dividing assets at the time of divorce or the death of a spouse. This can be even more complicated when there’s a new spouse in the picture.
- Become more familiar with your family’s finances. While many women today handle the household finances, there are still many women that aren’t very involved in the family’s financial decisions.
- It’s important for you to become aware of what’s happening with your finances and what plans exist for the future.
- Plan ahead and keep taxes in mind. While you can transfer assets to your spouse without a tax penalty in most cases, giving assets to your children at the time of your death can result in estate and inheritance taxes.
- Depending on your estate plan, let your children know that some assets might have to be sold to pay these inheritance taxes.
- Trusts are powerful tools. Most people think that trusts are only necessary for the very wealthy, but that’s just not true.
- Trusts can keep assets safe until children are old enough to manage them and they can also keep your ex-spouse out of the situation.
- Trusts can be used effectively by nearly anyone and are great for getting assets to the designated person.
- If you have a blended family situation, trusts can be used to protect inheritance and make sure the people who you intent to receive your property after you die do in fact get it.
- Think about passing on some of your assets before you die. You can give away up to $15,000 each year in cash or assets per beneficiary before a gift tax is enforced. That will minimize the amount of taxes your estate might be forced to pay later on.
- Share a joint account with your spouse. If one of you were to die or become severely disabled, it can take time to access the other person’s account. There can be expenses during this time that need to be addressed. These might be day-to-day living expenses or even medical expenses.
- That doesn’t mean that individual accounts are a bad idea. Just be sure to also have a joint account.
- Consider using payable on death beneficiary designations for individual accounts to avoid probate.
- Update beneficiary designations. Some assets like 401ks, IRAs, and other financial accounts can pass directly to a named beneficiary after you die. It is important to keep those beneficiary designations current.
Even though you probably prefer to put off your estate planning until the future, it will bring you peace of mind if you make your plan now and then revisit it at regular intervals. Estate planning can be different for a woman, depending on the circumstances.
Be proactive and take the steps to address your unique financial situation. You’ll be glad you did.