Steps to Having an Estate Plan

It’s a common misconception that only the rich need an estate plan. However, your estate refers to everything you own, and it can be any size.

Because of this, it is worth creating an estate plan.

Unfortunately, the entire process can seem a bit intimidating for those who are unfamiliar with it. Don’t worry; here, you will find the answers you are looking for, along with estate plan steps to ensure you protect your assets.

Estate Planning Explained

An estate plan outlines who receives your assets and handles your responsibilities if you are incapacitated or if you die.

One of the goals of an estate plan is to make sure your beneficiaries receive your assets in a way that reduces gift tax, estate tax, income tax, and other types of taxes.

Also, when done properly, estate planning will let you create a platform you can change and adjust as your financial and personal situations change. In most cases, using the services of an estate planning attorney is a smart move to ensure there are no issues with the estate plan created.

Estate Plan Steps to Use

Now that you understand what the estate plan is and what it does, it is time to learn how to create it. The steps of this process are explained here.

Create and Sign a Will

You know that having a will is important. You must have one to make sure your heirs receive the assets you want to leave them.

In the will, you will designate an executor. The executor will have the responsibility and power to pay any debts you have to distribute the remainder of your estate based on your wishes, which are outlined in your will.

It is also possible to use a revocable living trust to pass on your property after you die. Unlike a will, a living trust allows you to avoid probate. Probate is when the court determines if your will is still valid.

In some locations, probate is a time-consuming and expensive process. However, even when a living trust is created, the will is still the foundation of your estate plan if you have any minor children. This is because you must designate a guardian if you die.

If you happen to die without a will in place, then a judge will decide who your children will live with after you have passed.

Create Your Health Care Directives

It is important to write down your wishes for your health care needs. By doing this, you can feel confident that your wishes will be carried out if you cannot make medical-related decisions on your own.

A health care directive includes a living will or health care declaration and a health care power of attorney. This is what provides a person of your choosing the ability and power to make decisions if you cannot.

Take Inventory of Your “Stuff”

Some people don’t believe they have enough “stuff” to justify making an estate plan. However, once you begin looking around, you may be somewhat surprised by all the intangible and tangible assets you own.

Some of your tangible assets to include in your estate are:

  • Land, homes, other real estate
  • Collectibles (i.e., trading cards, antiques, art, coins, etc.)
  • Vehicles, boats, and motorcycles
  • Other possessions

Along with tangible assets, you likely have intangible assets, too. These include:

  • Life insurance policies
  • Mutual funds, bonds, and stocks
  • Savings and checking accounts
  • Retirement plans
  • Business ownership
  • Health savings accounts

After you have taken inventory of your tangible and intangible assets, you should figure out their value. You can utilize outside valuations for your home and financial statements when possible.

If you don’t have this outside valuation, value the items by considering how your heirs will value them.

Purchase a Life Insurance Policy

If you have minor children and own your home, you should consider purchasing a life insurance policy if you don’t already have one.

You should also consider having a life insurance policy if you believe your estate will have a large amount of estate taxes or debt. This can help ensure your heirs will still receive the property without using it to pay off your debts.

Name Your Beneficiaries

Not all assets pass to survivors by way of your will. That’s because some types of the property won’t go through probate.

For example, if you and your spouse jointly own a house, the right of survivorship means they will receive your portion of the home after your death. If you open a brokerage or payable-on-death account, the securities and cash in these accounts go to the beneficiary named on the forms you fill out.

Also, your life insurance policies, individual retirement accounts, and 401(k)s will pass to the beneficiaries designated in the documents.

Understand Estate Taxes

For most estates, no federal estate taxes must be paid. In most cases, the federal government only imposes estate taxes when you die if your estate is worth over $5.49 million.

Also, married couples can transfer as much as twice the exempt amount completely tax-free. Also, all assets you leave to a spouse or charity will be exempt from this tax.

Consider Digital Assets

If you are like most people, you probably have several online accounts. This includes things like bank accounts, Facebook, PayPal, email, other social media, and more.

While you may not really care what happens with some of these after you have passed, you should still create a list of them all, along with your login information and passwords. Once you have the list, give it to a person you trust.

This will allow them to access your digital assets after you have died. You can also leave instructions regarding what should be done with them after your death.

Write a Letter

Everything you want to tell people you have left behind won’t be included in your will in many situations. If you want to describe the type of funeral arrangement you want, write a separate letter that outlines this.

It’s also possible to create a letter to list items that have sentimental value and that you want your heirs to keep. Make sure you give the letters to someone you trust, such as your attorney, a family member, or a friend.

While some states won’t recognize these letters as a legal document, your loved ones and family members will likely respect your wishes.

Make Your Final Arrangements

It’s important to ensure that your end-of-life wishes are known. You can outline this in the letter mentioned above if desired.

You can also tell your family what you want. This includes organ and body donation and, if you prefer to be buried or cremated.

Reassess Your Plan Often

Your life will change over time. This means your estate plan should change, as well.

It is important to revisit your estate plan if your circumstances change, for better or worse. Some of these changes include losing a loved one, the birth of a child, getting a new job, divorce, marriage, or being terminated from your job.

Make sure you revisit the estate plan you create often, even in situations where your circumstances haven’t changed. While your situation may remain the same, the laws for your state may change.

While it takes effort and time to revise your plan, it is something you need to do. Making revisions will help you avoid one of the biggest mistakes related to estate plans – never having one at all.

Store Your Documents and Estate Plan Somewhere Safe

Once you have created an estate plan, you need to make sure you store it somewhere safe. You should also make several copies and ensure important people have them. This includes family members, friends, and your attorney.

You also need to ensure that the executor of your will and beneficiaries know where this paperwork is and how to access it.

Don’t Wait to Create an Estate Plan

You may think that you are too young or don’t have enough assets to justify creating an estate plan. However, it is never too early to do this.

You never know what will happen, and having these things in order will help save your family frustration and uncertainty after you die. Without an estate plan, things may be up in the air and difficult for your family members to handle.

Taking the Right Estate Plan Steps

The estate plan steps outlined here are necessary to ensure your affairs are in order and that your wishes will be carried out after you die. While you can find forms to fill out online to create this plan, it is always best to hire an attorney to help with this.

The attorney you hire can review the documents, ensure everything is legal, and stand up in court. This is going to minimize the hassle your family faces after your death.

Are you ready to find more information on an array of important topics? Do you want to stay informed and “in the know?” If so, check out our other blogs.