A Simple Estate Planning Checklist For a Challenging Topic

What does your current estate plan look like?  If you said you don’t have an estate plan, you’re probably wrong because the state you live in actually has a plan for your estate if you die without a will, trust, or other crucial documents.  If your line of thinking is “what estate…I’m overwhelmed by debt” or “I’m single with no kids” or “I’m young and just getting started in my career,” understand that everyone has an estate and needs an estate plan to make sure your individual, family, and financial goals are met once you die.

Just a few simple steps can help you maintain control and protect the people (and organizations) that matter most to you.  Here is a simple estate planning checklist to help get you started.

Step 1:  Establish meaningful goals.  What do you want your estate plan to accomplish? Are you concerned about choosing an executor or a guardian for your children?  Is charitable giving in your future plans?  Are you seeking ways to avoid probate?

Give your estate plan more purpose and meaning by asking yourself these same questions and writing down a list of the things that are most important to you!  Then, schedule time for you to take action and avoid making the mistake of not having a basic estate plan in place.  You can use this Personal Estate Planning Worksheet to write down some of your goals.

Step 2:  Get organized.   Have you ever been late for something important and spent time frantically searching your house for that elusive set of keys?  Not fun!  Imagine searching for a family member’s bank account information, investment and retirement account statements, will, or key to a safe deposit box without any instructions or guidance during a time of grief.

It always makes good sense to take time to get our financial affairs organized (no matter what the net worth situation may look like).  It’s also important to keep a list of online account passwords and digital assets in a convenient location for loved ones to access just in case something happens to you.  For more information on organizing your documents check out this resource at Nolo.com. You can use this basic financial organizer to help you assess the state your current financial situation.

Step 3: Evaluate your financial situation.  Start by completing a net worth statement that includes a list of your assets and liabilities.  Once you’ve compiled a list of your financial resources, you are in a better position to determine who should receive your assets after you pass away.  This step also involves reviewing your life insurance to cover your family’s needs for income, education costs and estate expenses.  Reviewing disability insurance is just as important because it provides income protection for you and your family during your lifetime.  For more information on life and disability insurance coverage, including needs calculators, visit www.lifehappens.org.

Step 4:  Have crucial documents created.  You can decide who you want making important financial or medical decisions if you are ever unable to make them yourself. Here is a list of important documents that should be part of almost every estate plan:

  • Will
  • Advanced healthcare directive (living wills)
  • Medical power of attorney
  • Durable power of attorney

This is where your estate plan gets really personal.  These important documents help you state your wishes for how to distribute assets when you die.  You also can use wills to name guardians for your children.

Trusts are legal arrangements that allow you to determine how and when property is distributed to your heirs. In certain situations, a trust may be necessary to maintain even more control over the distribution of your estate. If funded properly, many trusts can also help you avoid probate (wills are subject to probate).

Not sure where to turn for help in creating your important documents? See this guide on How to Choose an Estate Planning Attorney.  You may also check with your employer to see if they provide a prepaid legal service or free online document preparation.  If not, sites like LegalZoom and Nolo provide online tools to help get these documents created, which is important if you are concerned about the costs of hiring an attorney or have a fairly straightforward plan.  Just remember that if you don’t have these important documents in place you still have an estate plan—it just happens to be a plan based on the intestacy laws of your state.

Step 5:  Update your beneficiary designations and title assets appropriately.  Many people think that once a will has been created their estate planning work is done.  That’s far from the truth, especially considering the fact that the will controls the distribution of assets that are subject to probate, which is the formal process of paying off debts and distributing property.  Depending on the state you live in, probate can potentially be an expensive and time consuming process.

In addition, not everything transfers through probate.  Therefore, it’s important to identify assets that do not pass to others by will. These are often called will substitutes and include any accounts with beneficiary designations such as insurance policies, retirement plans, IRAs, and annuities.  Any jointly owned property or accounts bypass probate as well as accounts designated as payable on death (POD) or transfer on death (TOD).

Step 6:  Communicate your plans to those involved in it.  Discussing your intentions in advance can help avoid family conflicts and also minimize the potential for any confusion or questions regarding your true intentions.  If you have a plan in place but nobody is aware of it, then your wishes may be ignored or there may be significant delays in figuring out your desires.

Step 7:  Review your plan regularly and as major life events occur.  Life will undoubtedly throw a curve ball or two our way so it’s essential to review and adapt our plans as necessary.  Some situations that may require updates to your estate plan include marriage, the birth of a child (or grandchild), disability, the loss of a loved one, divorce, a financial windfall, or the creation or dissolution of a family business.  If any of those life events occur be sure to review the following documents:

  • Your will and any trust documents
  • Powers of attorney (medical and durable)
  • Beneficiary designations on retirement plans (401k, 403b, 457, etc.), IRAs, annuities, life insurance policies

In summary, estate planning is not always the most exciting topic (quite morbid actually) but it is an important aspect of every personal financial plan.  Just be sure to personalize your goals and take action to at least have a basic plan to protect your family and people you care about the most.  Some of these other steps such as evaluating your financial situation and getting organized are also best practice financial behaviors as you move to take control of over other areas of your financial life.



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