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7 Key Steps To Create A Good Estate Plan

7 Key Steps To Create A Good Estate Plan

Estate planning is a wise thing to do to ensure that your family and loved ones are safe and at the same time save them from unnecessary stress and headaches during an extremely difficult time.

A comprehensive estate plan is more than just the will, power of attorney, and trusts as it covers other critical information such as medical and other financial information too. While estate planning is a complex task it is crucial to start the planning process sooner than later, since you may not receive a warning for your impending death.

7 key steps to create a comprehensive estate plan

  1. Appoint a qualified estate planning attorney
  2. Make a list of what you own and owe
  3. Decide if you need a will or a living trust
  4. Make an advance health care directive
  5. Consider a financial power of attorney
  6. Appoint your beneficiaries
  7. Organize your documents and files
  1. Appoint a qualified estate planning attorney

    Hiring a seasoned attorney or lawyer is a first critical step when creating an estate plan. Estate planning is an essential decision of your life that involves your family, your finances including taxable and non-taxable obligations; even the slightest mistake here can prove to be disastrous. Since estate planning is a detailed, highly complex and time-consuming task, you should hire a well-qualified and experienced attorney who can assist you with a well-constructed estate plan.

    A professional attorney will analyse your family situation, guide you through the right steps and help you navigate through the complex process of developing an estate plan. You must also ensure that your attorney is well aware of the specific state laws as it will help you navigate through any legal formalities without any hassle.

  2. Make a list of what you own and owe

    Once you appoint a lawyer, you would be required to calculate your net worth. The best way to do this is to make a comprehensive list of your total assets and debts. Once your exhaustive list is ready, you can calculate your net worth by adding your assets including investments, bank accounts, personal property (like jewellery, art, furniture), cash value of any insurance policies, retirement plan - 401k and IRA, and owned cars, etc. and from that subtract the liabilities or debts including mortgages, personal loan, other borrowings, credit card balance, and student loan, etc. Doing this activity will help your lawyer to assess if your estate is liable for any federal state taxes or not.

  3. Decide if you need a will or a living trust

    An estate plan begins with a will or living trust. While you might be aware of these legal terms it is vital to know their implications and make a decision according to your personal concerns and situation. Whether it is a Will or a Living Trust both has its advantages and disadvantages and serves a different purpose.

    In simple words, a Will addresses possessions and inheritances of your assets to your beneficiaries, but it does not circumvent probate. Your assets mentioned in a Will goes through the state’s probate procedure before it is distributed to your beneficiaries which is a time consuming process. Not all assets will go through probate as there are a few exceptions too, but it is essential to dictate to whom the asset will go.

    Leaving your assets to your beneficiaries via a Will has many challenges and hassles and so many professional attorneys highly recommend a Living Trust to their clients. Unlike a Will, a Living Trust appoints a trustee to manage your assets and gives them the right to disperse the assets to your loved ones.

    Keep in mind to discuss the intricacies of both a Will and Living Trust and seek advice from your attorney to make the right decision that benefits your family.

  4. Make an advance health care directive

    An advance health care directive also known as Healthcare Power of Attorney which is a legal document that authorizes a trusted person (i.e. a trustee) to make crucial decisions regarding the medical care, should you become mentally or physically incapacitated. Disability planning is absolutely necessary. Therefore, it is advisable to express your medical care preferences and instructions to both your medical care provider and lawyer. Remember that having a disability plan may help you avoid court-supervised guardianship or conservatorship, and your family may not lose control of you and your property.

  5. Consider a financial power of attorney

    A financial power of attorney is a document that authorizes someone you trust, who can handle the financial, business and property related matters in case of disability. As per the legal terms, a person who gives authority is known as a principal, and the one who is designated to act on behalf of the principal is known as the agent or attorney-in-fact. The document gives the power to the agent to make financial decisions and transact real-estate matters immediately. Also, this document can help the families to avoid disputes over financial transactions.

  6. Appoint your beneficiaries

    Keep in mind that not all assets will be passed on to your survivors through your will as few properties do not require your family to go through probate. For instance, if you own a joint-property, then your spouse automatically receives the share of the house when you die and has the right of survivorship as per the house deed. However, if you have payable-on-death savings or brokerage account, then the cash and securities from those accounts will be directly passed on to specific family members or beneficiaries, whose name(s) you would have mentioned while filling up the beneficiary form in the bank or brokerage firm.

    Likewise, your 401(k), IRAs and other life insurance policies will be passed on to the respective beneficiaries you would have designated in those accounts. When you create your estate plan, it is important to present the beneficiary forms to your attorney to ensure that your estate plan covers all aspects of your assets. Make sure that your beneficiary name is correct and up to date which in turn will help them from going through the probate process and avoid paying additional money.

  7. Organize your documents and files

    Estate planning is not just about sorting the legal matter but also about making life easier for the family and executors. Storing your estate information (including relevant papers, documents, and the digital files) which is accessible to your family and heirs can help them save thousands of dollars in managing the legal, accounting and administration related matters.

  8. Here is a quick list of information that you must preserve and share with your loved ones:

    • Will
    • Trust
    • Power of Attorney
    • Bank accounts and credit cards (including card expiration date, login id and password)
    • Mortgages, Loans, and unpaid taxes
    • Pension Plans and Retirement Benefit Information (401(k), IRAs or Roth IRAs)
    • Titles or Deeds to Any Property
    • Investment Portfolios (details of stocks, bonds, and mutual funds)
    • Insurance policies (information covering life, health, car, and home insurance and others)
    • Funeral plans (Prepayments, arrangements and whom to notify)
    • Valuable items kept in the safe deposit boxes, and other locked or hidden places
    • Automatically Renewing Medications (such as the name of medications and details of the doctors)

    One of the most significant benefits of a well-constructed estate plan is the peace of mind. An estate plan can dramatically reduce the stress to the family in the future but do remember that it is not a one-time exercise but a life-long process that keeps evolving as your life progresses.

    Make sure that you revisit your estate plan and make changes to it as and when required to keep it updated. It is advisable to review your estate plan on a yearly basis or during any major event in the family like birth, death, marriage, or divorce to ensure that your documents still reflect your desires and your beneficiaries, designated proxies for healthcare and financial directives are still willing to take up the role when you are not around.

    Still not sure how to start the estate planning process? Seek help from an expert team of financial advisors and experts today.

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