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Estate planning checklist
Getting familiar with key estate planning steps and documents can make the process simpler, smoother and less stressful.
Who needs an estate plan? And why? The answers are pretty straightforward: Anyone who has savings, investments, real estate, or other valuable property – and wishes to leave the bulk of it to family or other heirs - should consider having an estate plan. Why? To help ensure that the assets will be distributed according to your wishes, to help spare your heirs from the hassles associated with probate court, and to work to prevent the IRS from taking more than their fair share.
Regardless of your current age or health status, if you have assets, the time to start thinking about estate planning is right now. After all, no matter how young or healthy you are, there is always some risk of premature incapacitation or death. In just a few minutes, you can get a helpful overview of what to consider, including:
The basic steps involved in estate planning
Key documents required
How to begin the estate planning process
Finding a professional to help with your estate plan
The key steps in an estate planning checklist
Mention estate planning, and most people anticipate a stressful, complicated chore. But if you take it one step at a time, it will probably not be as difficult as you think. Start at the beginning, go down the list, and – if you run into any issues you can't handle, think about speaking to a financial professional.
Step 1: Inventory your assets
Conduct a complete inventory of your assets and create a detailed list that includes current values, account numbers, stated beneficiaries, location of deeds and other documentation, location of valuables (such as a safe deposit box) and any other information that will make things easier for your loved ones or other heirs. Assets to be inventoried include: savings and bank accounts, retirement accounts, investment accounts, life insurance policies, real estate, vehicles and boats, jewelry, artwork, collectibles, antiques, and any other items that might be of value.
Step 2: List all your potential beneficiaries
Think about who you’d like to leave your assets to. At first, the list may include those who will definitely be among your beneficiaries – spouse, partner, children – and those you may want to include, such as siblings, nephews and nieces, close friends, or your favorite charities. Remember, this is not a final list. In most cases, you can update and revise your list of beneficiaries and bequests even after your estate documents are executed.
Step 3: Start developing your “directives.”
Your estate plan directives will contain legally binding instructions about how you’d like your assets and affairs to be managed in the event of your incapacitation or passing. Take some time to think about the issues and individuals involved, and as a start, write your thoughts down in plain English so that you’ll be better prepared to discuss them with your attorney or estate planning professional. The formal documents stating your estate planning directives typically include your will, your trust (if you set one up), durable power of attorney, and an advance healthcare directive (also known as living will). We will discuss these in more detail below.
The difference between a will and a trust
A will is a legal document that specifies how your assets should be distributed after death. Before beneficiaries get anything, the will must go through a legal process called probate, which can be time-consuming. A trust is an ongoing legal entity that can hold assets for years and distribute them according to specific scenarios you envision. For example, you could set up your trust to distribute funds to pay for a grandchild's education at age 18 or hold the money until age 25 if they don't need it for college. So, in addition to bypassing the uncertainties of probate, a trust can offer significantly more flexibility than a will.
Step 4: Designate an executor, beneficiaries, and trustees
Designating an executor, beneficiaries, and trustees for your estate is one of the key tasks in estate planning. The executor will be responsible for carrying out the instructions outlined in your will, so be sure to choose someone who is trustworthy, organized, and capable of handling complex financial matters. It doesn’t have to be a friend or family member – an executor or trustee can also be a trusted professional, such as an attorney. Your beneficiaries are those people or organizations who will receive your assets. Careful consideration should be given to their needs and circumstances to ensure a fair distribution of your estate.
Finally, if your estate plan includes trusts, you’ll need to designate one or more trustees to manage and distribute trust assets on behalf of the beneficiaries. Choose people who are financially savvy and trustworthy. Selecting the right people for these roles helps to safeguard your assets and protect your loved ones or other heirs.
Step 5: Get familiar with estate taxes
Estate tax laws cover the taxation of an individual's assets when they pass away. Understanding estate taxes - also known as "death taxes" or "inheritance taxes" - is essential for minimizing the taxes on your estate and maximizing the amount that goes to your beneficiaries. Estate planning involves sophisticated tax strategies and is best handled by an estate planning professional or tax attorney. That said, it's a good idea to read up on some of the basic issues involved to be better prepared for future conversations and decision-making with your professional advisors.
Step 6: Organize essential information
Take some time to make sure that any essential information and documentation regarding your assets is organized and will be easily accessible by your executor and attorney. This information includes life insurance and long-term care policies; property deeds for your home and other real estate; proof of ownership for vehicles and boats; copies of detailed statements from all savings accounts, retirement accounts and investment accounts; a complete list of all valuables including descriptions, approximate value, and location; receipts for purchases of valuables especially jewelry, artworks and other items that will be subject to appraisal. By ensuring these records are available, you'll take a big step toward securing a smooth and efficient estate administration process.
Also, note that it’s generally not recommended to leave the only copy of your will in a safe deposit box. After a person's death, the box is typically sealed by the bank until the executor or administrator of the estate is granted access, which can cause unnecessary delays for beneficiaries.
Step 7: Find an estate planning professional
At this point in the estate planning process, you'll probably be ready to sit down with your attorney or an estate planning specialist to begin working on the required legal documents, including your will, trust and durable power of attorney. While it's important to point out that some people attempt to tackle this step independently - using pre-formatted templates or estate planning apps - most experts tend to counsel against completing these documents without professional help.
Step 8: Execute the legal documents
The final step in the estate planning process will be to create and execute the required documents, as outlined below. There should be at least three original copies of all documents – one to be retained by your attorney, one to be retained by you, and one for your executor. Please be sure to store your copy in a secure location, such as a home safe. And remember: In most cases, these documents can be revisited and revised at a later date should the need arise, or even if you just change your mind about how to distribute things.
Key documents needed in an estate plan
A complete estate plan may include the following legally-binding documents. While it is possible to create and execute these documents on your own, it is not recommended. A professional such as an estate attorney can help to speed up the process and help ensure that the documents are completed correctly under the law.
1. Will
At the heart of your estate plan is your will. A will is an essential legal document that outlines your wishes about asset distribution, your choice of executor, and guardians to be appointed for any minor children.
2. Trust
While a trust is not an essential document, many people choose to create one for the flexibility it provides. A trust names a trustee(s) who is legally responsible for managing and distributing your assets to your beneficiaries according to your instructions. Often, a trust is used when the beneficiaries - including minor children – won't be able to manage their inheritance by themselves. In addition, trusts can help your heirs avoid probate and may offer some significant tax benefits.
3. Revocable Living Trust
This type of trust can be altered or revoked by you as long as you are mentally competent. It allows you to control your assets while alive and, in most cases, ensures that your beneficiaries will avoid the hassles of the probate process when you pass.
4. Power of Attorney (POA)
A Power of Attorney is a legal document that grants authority to another person to act on your behalf should you become incapacitated. There are different types of POAs:
Medical POA - Also known as a Healthcare Power of Attorney or Medical Proxy, this document allows a trusted individual to make medical decisions on your behalf if you become incapacitated and cannot make these decisions on your own.
Financial POA - This document allows a trusted individual to handle your financial and legal matters if you are incapacitated and are unable to do so.
Limited POA - A Limited Power of Attorney grants specific powers to a trusted individual for a limited time or in specific situations, such as a real estate closing.
Advance Healthcare Directive - An Advance Healthcare Directive - also known as a living will or personal directive - is a document that outlines your wishes regarding medical treatment and end-of-life care. It is used if, at any point in the future, you are unable to communicate your wishes verbally or in writing.
How to find the right estate planning professional
If you need help developing or refining your estate plan, consider working with an estate planning professional. Here are a few tips to help ensure that you find someone who is competent, trustworthy and in synch with your needs and wishes.
Start by seeking recommendations from friends, family, or colleagues. This is the simplest route, and firsthand referrals can be invaluable. If you prefer to conduct your own research, look for certified estate planning professionals or financial planners with strong credentials and positive client reviews. Ask them about their approach to estate planning, fee structure, and how they prioritize client goals. Trust your instincts and choose someone who not only demonstrates expertise but also exhibits professionalism, integrity, and a genuine commitment to your best interests.
Guardian has people who can help
Need help locating an estate planning professional who can help? A Guardian Financial Professional can help you to better understand the estate planning process and help you to make the right decisions for yourself and your heirs. To find someone near you, just fill in your zip code and click below.
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Material discussed is meant for general informational purposes only and is not to be construed as tax, or legal advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon only when coordinated with individual professional advice. Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.