Broker Check

Estate Planning: A Basic Checklist

| November 20, 2019
Share |

The term estate planning refers to the series of steps that you take to name the people or the entities that your assets will pass to in the event of your death or incapacitation.

Estate planning also helps establish how your children will be taken care of. It's important to not make the mistake that about one in three make and neglect to plan in advance.

If the idea of doing estate planning makes sense to you, what follows is a six-step estate planning checklist to help you make sure that your family is taken care of, and your assets are distributed in a way that works for you.

Draw up an inventory of everything you own

Many people neglect to perform estate planning for the simple reason that they believe they don't have enough assets to justify such a move. In most cases, however, even what at first seem like modest asset levels can add up to substantial sums of money.

The first item on your estate planning checklist, then, should be to draw up an inventory of both the tangible assets (property, vehicles, collectibles), and intangible assets (investments, retirement plans, life insurance policies) that you own.

Once you draw up a list of your assets, you need to work out how much they are worth. You may need to hire a real estate appraiser to accurately value the real estate that you own. Financial statements from the brokerages that you use will help you value your investments.

In the event that you don't get your assets valued by professionals, it could help to value them the way you believe that your heirs will do it. Doing this can help make sure that your estate is distributed in an equitable way among your loved ones.

Take care of your family's needs

Once you have a realistic idea of what assets your estate holds and what they are worth, you need to plan to protect them, and provide for your family.

 Life insurance: If you have to provide for a special-needs child, for a child's college tuition, for a spouse who is a homemaker, or for the part of your mortgage that remains unpaid, ensuring that you have enough life insurance can be an excellent idea.

Arrange for the guardianship of your children: When you prepare your will, you should make sure that you name primary and backup guardians for your children in the event that both you and your spouse should pass away. Naming guardians can help prevent expensive court battles later on, about who gets custody. Such litigation, if it occurs, may end up depleting your estate.

State clearly how you want your children to be raised: While it may be easy to assume that the friends or family members who get custody of your children will raise them the way you wish, it's something you shouldn't take for granted. If you have specific ideas about how your children should be raised, you should make sure that you specify them in your will. 

Set out your directives

A living will or medical care directive: This helps you specify what kind of medical care you should receive if you should become unable to make those decisions for yourself due to incapacitation. A medical power of attorney can hand power over to someone you trust to make medical decisions for you in such a situation.

A durable financial power of attorney: When you name someone with a durable financial power of attorney, you authorize them to take care of your financial affairs in the event that you should be unable to take care of them yourself for reasons of poor health.

 A limited power of attorney: If the idea of authorizing someone else to take over all your affairs for you makes you nervous, you can draw up a limited power of attorney. With such a document, you get to grant others the ability to take actions on your behalf in some specific areas, but not others.

 A trust: When you create a living trust, you set aside part of your assets to be used for certain purposes. Should you become too ill to conduct your own affairs, a trustee that you have named can take over. In the event of your death, the assets of the trust are transferred to the beneficiaries that you've named, with no need for a probate court process.

 It's important to remember to be careful about whom you hand power of attorney over to. It's power that can be used against your wishes, should you not choose wisely.

 Go over the beneficiaries that you've chosen 

If you have insurance or retirement accounts, you should make sure that the beneficiaries named in them are the same as the ones in your will. If different beneficiaries are named in each, it is usually the ones named in the insurance and retirement accounts that hold, not the ones named in your will.

Sometimes, people name their spouse as beneficiary on their retirement or insurance accounts, forget all about them, and get divorced. When they pass away, these accounts are closed, and their value passes to their former spouse rather than their current spouse. It's important to keep the beneficiaries mentioned on these accounts up to date.

 Pay attention to your state's estate tax laws

Estate planning is an important tool by which to minimize drain on your assets in the form of inheritance and estate taxes. Federal taxes only apply on estates valued at over $11.4 million. For this reason, most people won't need to pay federal estate taxes.

Some states have estate and inheritance taxes, however. If the state that you reside in taxes you in this way, you need to plan for it.

Consider hiring a professional

 If you have basic needs, will-writing software or an online will-writing service should do. These services give you state-specific guidance on writing your will.

 If you have more complex needs, however -- with businesses, heirs who are not family and so on - hiring a tax advisor may be advisable.

Finally, while planning your estate is something that you should start doing early in life, you should consult with a financial advisor to help you reevaluate your estate planning checklist once every few years, or when major events occur in your life.

Contact Matt Logan to make sure that your estate plan always reflects what you currently wish to see done with your assets and how you wish to see your family protected. Give a call today at 336-540-9700.

Share |