9 Simple steps for estate planning
- Make a will.
In your will, you state who you want to inherit your personal and other property, you appoint a person responsible to effectuate your wishes and name a guardian to care for your young children and a trusted person to take care of their inheritance should something happen to you while kids are still minors.
- Set up a trust.
If you hold your property in a living trust, your survivors won’t have to go through a prolonged and expensive a probate proceeding. You can also provide for a trust in your Will which is necessary if the beneficiaries are minors. Through a trust you can ensure that your estate passes only through bloodline (from children to great children) and protects assets from children’s creditors. You should name a trusted person to manage any funds and property for your beneficiaries.
- Make health care directives.
Writing out your wishes for health care can protect you if you become unable to make medical decisions for yourself. Health care directives include a health care proxy and a living will, which gives someone you choose the power to make decisions if you can’t.
- Make a financial power of attorney.
With a durable power of attorney for finances, you can give a trusted person authority to handle your financial affairs if you become incapacitated and unable to handle it on your own. For digital assets, consider a Digital Authorization to allow your attorney in fact to have access and properly manage all your online accounts and electronic devices.
- Update beneficiary forms.
Naming a beneficiary for bank accounts and retirement plans makes the account automatically “payable on death” to your beneficiary and allows the funds to skip the probate process. Consider setting up payable-on-death account at your bank and deposit funds into it to pay for your funeral and related expenses.
- Consider life insurance.
If you have young children or you may owe significant debts or estate tax when you die, life insurance may be a good idea. If children are minors, the policy should be paid into a trust for the benefit of your children.
- Understand taxes.
Most estates won’t owe federal estate taxes, but it is important to do a planning to make sure to get the best income tax results for the property that is being gifted or passed on by inheritance.
- Protect your business.
If you’re the sole owner of a business, you should have a succession plan. If you own a business with others, you should have a buyout agreement, coupled with a life insurance policy.
- Store your documents.
Your attorney-in-fact and/or your executor may need access to the following documents:
- your estate planning documents
- insurance policies
- real estate deeds
- certificates for stocks, bonds, annuities
- information on bank accounts, mutual funds, and safe deposit boxes
- information on retirement plans, 401(k) accounts, or IRAs
- information on funeral prepayment plans, and any final arrangements instructions you have made.
