Building an estate plan can seem like a daunting task, especially if you don't know where to begin. Few people really want to think about what will happen to their stuff when they pass away but putting together a strong estate plan can help save your loved ones time, expense and anguish as they try to sort things out.
Fortunately, by following a few key steps you can plan ahead and help ensure the people you care about are taken care of when you're gone.
The first key step to building a solid, thorough estate plan is to have a complete understanding of your assets and liabilities. In order to be as exhaustive as possible, it may be wise to project future assets and liabilities that you anticipate in the future. These may include a future business venture, an expected mortgage or any inheritance you may have coming your way.
Once you have a thorough balance sheet in hand, you can embark upon the next step: going through it and deciding where you want your assets (and, in some cases, liabilities) to end up when you're gone. You may want to leave your business interests to a trusted partner or set aside some money for your children's college education.
Finally, the third step is to take those decisions you've made and codify them in a will, trust or both. A will goes into effect after your death and can only allocate property that is held solely in your name. On the other hand, a trust can go into effect immediately and only applies to property that has been transferred into it.