Estate Planning Checklist: The 9 Essential Steps of Estate Planning

An estate plan ensures that the assets you worked so hard for are passed on to the people you love.  In addition, it makes the complicated process of carrying out your last wishes as simple as possible for those you care about. In this article, we will cover the basic steps of estate planning, including which documents you must have for your affairs to be in good order and what professionals you should hire for this process.

Consider Life Insurance

Life insurance is not a requirement for everyone, but it can offer a solid safety net for your family in certain cases. Life insurance can be applied toward paying off any of your outstanding debts and toward funeral expenses so that neither of these becomes a burden on your descendants. It can also be used to cover income or estate taxes on any inheritance you leave to your heirs.

If you do not have significant debts and you are already putting money aside to pay for funeral expenses, purchasing a new policy may not be worth the premium.   If you have existing policies, think carefully before you let a term insurance policy lapse, and if you have insurance that has a cash surrender value, carefully evaluate the tax consequences if you ever consider surrendering it during your lifetime.

Create a Will and Consider a Trust

At the most basic level, you will need a will that provides instructions regarding where to direct your various assets and, if you have minor children, who will care for them. Without one, you risk leaving these decisions to a judge or other state official and may create family tension as your loved ones try to figure out what you would have wanted. 

In addition to a will, some people create a trust. This is a different method for transferring assets that allows you to avoid the costs of probate court and although it increases the attorney’s fee for preparing your estate plan, the increase is more than offset by the savings in attorney’s fees after you die.  With a trust, you name a trustee who is responsible for executing the trust after you die without intrusive court proceedings, keeping all issues regarding your estate private.  However, after you create your trust you must retitle all your assets to the name of the trust before you die to avoid probate court.  If you create a trust, you will also need a will, sometimes called a pour over will, to catch assets that you neglected to retitle into the trust and also to name a guardian for your minor children.

Make an Advance Healthcare Directive

Sometimes called a medical directive, this is a legal document that names your healthcare power of attorney (more on that below) and specifies the actions you want to be taken in various medical scenarios where you are no longer able to make decisions yourself. This is where you will have the opportunity to forbid certain treatments or direct the course of healthcare you prefer, helping to relieve some of the burdens of tough end-of-life decisions for your family.

Make Final Arrangements

To simplify the process and provide support to grieving descendants, you should leave clear and detailed instructions for your funeral and memorial services, as well as your preferences regarding organ donation and burial method. If you have opted to skip life insurance, you should also open an account specifically to cover the cost of the funeral arrangements you would like.

Name Your Financial and Healthcare Powers of Attorney

Your financial power of attorney will have the ability to buy or sell assets, access your accounts, and make decisions regarding your finances if you become incapacitated or are otherwise unable to do so yourself. Similarly, your healthcare power of attorney who is named in our Advance Health Care Directive will have the power to make decisions regarding care as well as authorize operations or the withdrawal of life support if your predetermined criteria are met.

This can be the same person or two different people but either way, choose someone you trust to handle your affairs in accordance with your wishes. If you are not comfortable giving unrestrained power of attorney for either your finances or your healthcare, you can create a limited power of attorney. This document allows you to set limitations on what powers you are granting. You can specify exactly which kind of decisions they will be able to make and which they cannot.  A limited power of attorney might seem wise, but if unforeseen circumstances necessitate actions you have not specifically authorized then a costly court proceeding may be required.

Name a Guardian for Your Children

If your children are still underage, you need to name a guardian in your will. In addition, you may want to leave instructions to guide your guardian and children as your children grow up. 

The guardian may also be the person who manages any property or accounts you are leaving for your children until they reach majority, which in most states is 18.   However, if you prefer, the person who manages your children’s inheritance can be different from the person you name to be their guardian, subject to the court’s approval. The property guardian will be supervised by the court.  

 If you want to avoid the need for court approval of the guardian of the property, or avoid court supervision, or if you want the guardian to manage your children’s inheritance beyond the age of majority, you can accomplish these things by creating a trust. 

File Beneficiary Forms

Retirement accounts, life insurance, and annuities pass to the beneficiary named in the contract that created these assets.  To ensure that all your assets are left to the people of your choice, you will need to keep current the beneficiary forms for all these accounts. Take some time to inventory all these accounts and gather the beneficiary designation forms that are on file with the custodian.  If you are unable to locate the beneficiary designation form, call the custodian for the account for which the form is missing and request a copy.  Alternatively, request a change of beneficiary form or get the change of beneficiary form on-line.  Complete the form, sign it, make a copy, and file it with your will and trust, and follow the custodian’s instructions for returning the form to the custodian.  The custodian is the company where the account is located.  When you die, a probate court proceeding will be necessary for any accounts for which no beneficiary form can be located. 

Hire an Estate Planning Attorney

If reading through these steps has you feeling a little overwhelmed about the estate-planning process, that is perfectly normal. You can make the whole process a lot easier and avoid any oversights or mistakes by hiring a professional estate planning attorney.

Using their advanced education, legal expertise, and vast experience in this field, an estate planning attorney will help you analyze your assets, ensure that you have all the documents you need, and provide insight and advice regarding the decisions you need to make as you plan your estate.

Equally important, your estate planning attorney or someone from their firm will provide much needed guidance and expertise if you become incompetent or die.

Organize and Store Your Documents

Once you have completed your will and all the other documents relevant to your estate, put them together in a single folder and store them somewhere safe.  Along with your will, trust and other legal documents, you will also want to include in this folder a complete and up to date inventory of assets and liabilities,  and information for accessing your accounts, recurring income and bills, and any outstanding debts, and  contact information for family and advisors.

This is also where you would keep instructions for funeral arrangements. Keeping these documents organized and easy to find will ensure that your attorney or your named executor will be able to access them and carry out your wishes as you intended.

Estate planning requires making some tough decisions regarding inheritance and your last wishes but by preparing thoroughly you are doing your part to minimize the stress and emotional impact of your death and of the transition your family will need to afterward. Contact us today to get started!