How to Create an Estate Plan

No matter your net worth, you need a plan set in place that can help your heirs understand your final wishes and distribute your estate properly. As you prepare to discuss this with your financial advisor and heirs, here are a few tips and considerations to keep in mind.

Name an Executor

After your passing, you’ll want to have somebody in place who can execute your wishes. This person is aptly named an executor.  

Many people choose a spouse, sibling, child or close friend as executor.  You might give special consideration to someone who is well organized and capable of handling financial matters. Someone who is respected by your loved ones and a good communicator also may help make the process run smoothly.

Above all, an executor should be someone trustworthy, since this person will have a legal responsibility to manage your money, pay your debts (including taxes) and distribute your assets to your beneficiaries as stated in your will.

If your estate is large or you anticipate a significant amount of court time for your executor, you might want to seek the help of a bank, an attorney, accountant or financial advisor.

Understand Estate Taxes

Tax planning could be an integral part of your estate planning strategy, depending on the size of the estate. You may want to work with a tax professional who can help you navigate state inheritance laws and federal estate taxes. The 2017 Tax Cuts and Jobs Act raised the federal estate tax significantly, making it easier for families to maintain their estate when transferring it to loved ones. Estates with combined gross assets under $11,700,000 (for individuals) are not required to file an estate tax return.¹   

Prepare Your Health Care Documents

Healthcare documents spell out your wishes for health care if you become unable to make medical decisions for yourself. They also authorize a person to make decisions on your behalf if that should prove necessary.

These documents may include:

• Living will
• Power of attorney 
• Durable power of attorney agreement for healthcare

It is very important that you have this conversation while you are able and before you need anyone to act on your behalf.  While this is a difficult conversation to have, it will help your loved ones execute your wishes and accept the consequences.

Assess Your Life Insurance Policy

When was the last time you assessed your life insurance coverage? Have you compared the life insurance benefit with your financial obligations? Keep in mind that several factors will affect the cost and availability of life insurance including age, health and the type and amount of insurance purchased.

You might consider analyzing your life insurance policy with your financial professional to make sure that is still meets your needs and is best suited to you, your loved ones and your situation..

Write a Letter of Intent

A letter of intent is a non-legal document that outlines your wishes. A strong, well-written letter may save your loved ones time, effort and expense as they administer your estate. It acts as a message from you, the deceased, and can include an array of information from outlining last wishes, to detailing information and sending personal messages. Consider including instructions for your funeral arrangements and other details that are important to you.

Organize Your Documents

After your passing, you’ll want your heirs and executor to be able to easily obtain and access important documents. 

These documents may include:

• Your will
• Trust documents
• Life insurance policies
• Deeds to any real estate, and certificates for stocks, bonds, annuities
• Information on your financial accounts and safe deposit boxes
• Information on your retirement plans
• Information on any debts you have: credit cards, mortgages and loans
• Phone numbers of important contacts, such as your financial advisor, your attorney or your accountant

Talk to Your Family

Do you have stepchildren and ex-spouses? Have you been caring for any foster children? Have you been caring for a grandchild, niece or nephew? With the help of a financial planner and an attorney, you can structure a will or trust that accounts for everyone for whom you wish to provide. The more clear and specific you can be the better, as you will reduce the amount of confusion among your family. Otherwise, everyone who thinks they deserve something from your estate may try to extract it in probate.

There are many factors to consider when creating an estate plan. Before diving into the estate planning process, you should consult with a seasoned financial professional and estate planning lawyer. They will help you make sure you’ve covered all the bases when working to plan for your passing.

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