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Estate planning checklist: 9 steps to prepare

What we'll cover

  • The definition of estate planning 

  • Estate planning basics

  • What to consider when planning

Is an estate plan right for you and your family? It's a great question and possibly one of the most important questions you can ask. That’s because an estate plan outlines your wishes, usually allowing your assets and debts to be easily settled for your family in the event of your death.

Is an estate plan right for you and your family? It’s a great question and possibly one of the most important questions you can ask.

An estate plan helps you answer questions like “Who will my belongings go to?” and “How can I preserve more money for my beneficiaries?” Plus, it can help you minimize the probate process, which is a legal process that involves appointing an executor or personal representative who will administer your estate.

We’ll walk you through the definition of estate planning as well as estate planning basics in this article. It may not be super exciting to put together an estate planning checklist, but it’s one of those “adulting” things that you want to get right.

What is estate planning?

An  estate plan  refers to documents that specify how to distribute your investments and other assets so your loved ones know exactly what to do, making the distribution of your assets easier immediately after your death.

An estate plan goes beyond a will. A will is a simple document that shares information about the distribution of your property and might specify who you may designate to take care of your children in the event of your death.

An estate plan helps to ensure this as well, but it might also help you avoid taxes, fees and court costs. You should consult a legal and/or tax professional to discuss your unique situation to determine what may be the best approach for you.

While many people will choose to execute a will, not everyone needs an estate plan. The decision is a personal one and depends on more than the potential size of an estate.

Estate planning basics

You may want to put your own estate planning checklist together and organize it in a manner that fits your needs. In addition, it is helpful to make sure your loved ones know which attorney’s office houses your documents.

Graphic titled Estate planning checklist: 9 steps to prepare with a list of items numbered 1 through 9 stating with Itemize your inventory, account for your family’s needs, establish your directives, review your beneficiaries, know your state’s estate tax laws, cover your debts, consider a power of attorney, get a will and testament, plan to reassess.

1. Itemize your inventory

When the time comes to put together a comprehensive list, one way to do it is to put together all your larger assets and any special gifts you would want to make. This can include liabilities as well as assets. You could then assess everything you own, including your life insurance and your bank accounts. If you’re working with a financial advisor, that individual can usually help you put together the most comprehensive list possible.

2. Account for your family’s needs

What does your family need? How would you like to provide for your spouse or children? A primary responsibility of parents is to care for their children. So once your family grows, it is generally a good idea to specify a guardian for your children in case you or your spouse can’t be there. Writing a will or trust safeguards your children’s inheritance and secures their care through adulthood.

Think of everything at every stage of life. If you’re middle-aged, long-term care may not be at the top of your mind, but it’ actually can be a very good time to start the conversation. The realities of health issues could arise during this life stage.

3. Establish your directives

Medical directives allow you to order your own care in case you are too sick to make decisions about your own medical care. Advance directives generally fall into two categories: living will and health care proxy.

  • Living will: A living will is a written, legal document that lists treatments that you might or might not want to keep you alive, as well as your preferences for other medical decisions, such as how you want to manage pain or whether or not you want to donate your organs.

  • Health care proxy: A health care proxy and medical power of attorney do the same things. They are a type of advanced healthcare directive, which are legal documents that say what actions should be taken regarding your health and medical treatment if you can no longer make decisions due to illness or incapacitation.

4. Review your beneficiaries

Correctly title and list beneficiaries on certificates of deposit (CDs) as well as on money market, annuities, retirement, savings and checking accounts. Beneficiaries are the individuals who you prefer to inherit the assets. Non-retirement accounts may not ask for a beneficiary list because they usually pass through the distribution provisions in your will. It is a good idea to review who you want to receive those items with your estate planning attorney, so you know you’re covered.

5. Know your state’s estate tax laws

Will your beneficiaries have to pay an estate tax, an inheritance tax or both?

6. Cover your debts

Your debt becomes the responsibility of your estate when you pass away — debts such as a credit card balance or an outstanding loan become the responsibility of your estate.

It might be a good idea to minimize debt now if you want to allocate a specific amount to your beneficiaries. This could mean relieving yourself of credit card debt, paying off your mortgage, taking care of personal loans, car loans and other debt.

However, if you still have debt, you can include specifics about what you want your loved ones to receive. For example, maybe you have a valuable Corvette that you want your son to receive. In that situation, you could instruct that the car isn’t sold to pay back debt and other items are liquidated instead.

One thing you could also consider is to get life insurance. A life insurance policy can cover things still needing to be paid Life insurance may give your loved ones breathing room after you pass away.

7. Consider a power of attorney

A power of attorney gives someone the authority to act for another person in certain situations, including in both health and financial situations if they can’t make decisions on their own behalf.

A durable power of attorney formally designates someone to take care of your affairs if you cannot. This document is a written authorization to act on another’s behalf if they are sick, have been in an accident, or are otherwise disabled.

It’s a good idea for even young adults to designate an agent who can make medical decisions on their behalf if they become incapacitated. Without this precaution, parents or guardians may be unable to make decisions for them in the event of a medical emergency.

For older people, some significant issues that come up could be deciding on a durable financial power of attorney, assigning healthcare proxy, obtaining HIPAA release for caregivers, and updating a will as needed. An estate planning attorney can help you draft a power of attorney.

8. Get a will and testament

A will describes how you would like your assets to be distributed and lists any special instructions that you want carried out, including naming someone you trust as a guardian for your children. It’s a good idea for every adult to have a will, and there are many different types available.

You may also be curious about the difference between a will and revocable living trust. A revocable living trust goes into effect immediately upon signing and funding it, whereas a will only goes into effect after someone passes away.

Do you need a will or trust? Check with an estate planning attorney to understand the differences between a will and trust and whether which works best for you in the will vs. living trust debate.

9. Plan to reassess

After having an estate plan in place, you may want to evaluate whether or not to update it after major life events, such as a marriage or after the birth of a child. Acquiring or selling large assets, such as property or a home, may require an update as well. Unexpected events happen in life, so do your best to prepare for them. When a couple divorces, important documents are often revised to include new beneficiary designations.

In addition, you may want to consider whether you still want to keep the original executor or co-executors of your estate, or the person or people who you want to administer your estate. If you have personal communication to pass along, such as expressions of affection and personal values, you can include these sentiments in your estate plan.

Estate planning is a serious undertaking, but putting together estate planning documents can be an important step for your peace of mind as well as that of your loved ones. It is always a good idea get a qualified attorney that you trust on your side to make sure everything is in order. If it’s not, you could be putting financial power in someone else’s hands besides yours and your family’s.

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