Many in New Jersey tend to be overwhelmed before they even begin the estate planning process. For this reason, the idea of sitting down to create an estate plan may seem slightly less terrifying than going to the dentist. In reality, the process can be broken down into simple steps that can make it more manageable and less of a mystery.
The first step is to draft and sign a will. This document is the cornerstone to every estate plan. Without it, the state will decide where a person's assets go despite his or her wishes otherwise. A companion document to a will that some people will choose to have is a trust. There are many types of trusts to suit a multitude of family dynamics and are widely used to avoid payment of estate taxes.
The next step is to fill out beneficiary designations for assets such as life insurance policies and retirement accounts. It is important to keep these designations updated since they will override a person's will. If an estranged family member or ex-spouse is listed as the beneficiary, that person will receive the proceeds from the account or life insurance policy regardless of what the will says.
Durable powers of attorney, healthcare powers of attorney and living wills are documents that direct how a person's affairs will be handled in the event the party becomes incapacitated. These documents often have built-in safety measures to ensure a party is truly incapacitated before they can be used. Without these documents, family members are left to argue among themselves about what a person's wishes are, and in the end, they may not be right.
Once these documents are drafted and executed in accordance with New Jersey law, organizing paper and digital files can make things more "user friendly" for family and friends upon death. After this organization is complete and people who need to know where everything is kept have been informed, the estate plan is in place. A periodic review of these documents will make sure they remain current as the years go by.
Source: Consumer Reports, How to Create a Bulletproof Estate Plan, No author, Nov. 12, 2013