Estate Planning may be underestimated by many for the power it can have in your life and the peace of mind it can give you throughout your life. It is the ultimate plan for pulling together many aspects of your life, not just financial. It can be the guide for your health, your assets, and your legacy. Proper estate planning isn’t about the documents…it’s about what you want to have happen while you are alive and when you aren’t with us any longer.
A well-prepared estate plan can help you and your family reach many different goals. You may know that your estate plan provides for your spouse and children, including what should happen to them, if they are minors and need someone other than you and your spouse to rear them. In addition, says the Brainerd Dispatch in its article “Wealth Column: Estate Planning Basics,” an estate plan can also be used to dispose of the family business, minimize tax liability and empower an executor and trustees to act on your behalf.
To help you get started with some of the basics of what is included in an effective estate plan, let’s start with the most fundamental and basic component, a Will. It is the most basic tool used in estate planning. It helps you to prevent two very expensive and stressful issues, managing your wishes for your estate and potentially losing hefty sums through unnecessary taxes.
Next to the will, you may also need some trusts and other instruments, depending on your family’s situation. You’ll also want to have life insurance policies with beneficiaries listed on those policies. Life insurance proceeds are not governed by your will since your heirs will receive any funds directly from the insurance company. Benefits from retirement funds also fall into this same category, they use beneficiaries to allocate the funds. Making sure your beneficiary designations are up-to-date is a very critical and important component to check off your list.
Another key aspect of your estate plan goes beyond your taxes and investments…it also includes your power of attorney and medical directive. Here are some of key components and steps I would recommend to get your estate plan started and underway…
- Gather personal data about yourself and your family
- Create a balance sheet of your assets and liabilities
- Review your existing will and any existing trusts or other instruments you have created
- Evaluate all estate tax options, such as the best method of disposing of your share of community property, considering the unlimited marital deduction and the use of tax-sheltered trusts
- Consider the optimal way to distribute your retirement plan benefits
- Calculate potential estate, gift and income tax liabilities
- Determine the availability of liquid assets to meet potential estate expenses and taxes
Working with a team of trusted advisors is generally one of the most productive ways for most people to get all of this under control and have more peace of mind. Once you have all this information together, you and your estate planning attorney can begin to put together a plan that will serve you and your family. Remember that an estate plan is not a one-and-done document…it is a “living” document that changes over time as your life changes. Your life and tax laws change…it’s a part of life. So it’s crucially important to review your estate plan on a regular basis, at least when there is a major change in your life or your family members lives. This can include changes in income, family members, assets, your health, and just about anything else that happens in your life. I recommend everyone revisit their plan annually, even if no significant changes need to be made. This way you ensure things will happen the way you want and you can continue to have peace of mind this is take care of for you and your family.