Get estate planning advice to develop a clear understanding of what estate planning is, who needs to prepare for it, and steps to take to secure your beneficiaries’ financial future. Discover why proactive estate management is a key part of retirement financial planning in this comprehensive guide.
What Is Estate Planning?
Let’s begin with the basics: What is estate planning? Estate planning involves taking inventory of your assets and liabilities and then developing a plan for the distribution of those assets to your beneficiaries after you pass away. It’s an integral part of creating a sound retirement planning strategy and offers peace of mind when you know that your assets will be properly managed and distributed according to your wishes.
While we tend to associate estate planning with writing a will it encompasses much more than that. In addition to drafting a will, estate planning involves taking an inventory and documenting assets and liabilities, managing transfer authorizations, navigating powers of attorney and trusts, planning for medical and dependent care decisions, and selecting your estate administrator and will executor.
How Does Your Estate Planning Affect Your Beneficiaries?
Estate or legacy plans can significantly affect the wealth transferred to your beneficiaries.
- Asset distribution: Beneficiaries receive the assets you designate for them.
- Taxes: Inheritance, estate, gift, or generation-skipping transfer (GST) taxes may be owed by beneficiaries on property or assets they inherit from you. Your estate administrator will be responsible for filing an estate income tax return as well as your final income tax return upon your passing.
- Legal proceedings: Beneficiaries may face court proceedings involving distribution, trusts, and disagreements on asset distribution after your passing if you haven’t properly done estate planning. It’s in everyone’s interest, therefore, to have your estate planning completed well in advance to help ensure your survivors and beneficiaries avoid the delay and unnecessary expenses associated with sorting out your estate.
- Intestate distribution: If you pass without creating an official will, your assets may be frozen while the state determines which beneficiaries will receive your assets and in what amounts.
- Peace of mind: Knowing your assets are being allocated in accordance with your wishes can help your beneficiaries accept the outcome and avoid family conflict.
Isn’t Estate Planning Only For the Wealthy?
Is estate planning only for the wealthy? Certainly not. Creating a solid plan for your estate, final wishes, and asset distribution to beneficiaries can span far beyond financial assets. If you have dependents or want to leave something behind for your loved ones after death, estate planning is the only way to ensure your wishes are followed.
Examples of circumstances where estate planning is generally beneficial include:
- You have dependents or pets who rely on you for care and need a successor guardian in your stead.
- You want to leave specific assets to beneficiaries, including property, money, or sentimental belongings.
- You don’t want your assets or liabilities to be distributed through intestate succession, where the state automatically allocates them to your closest kin.
- You want to create a plan for outstanding debt and funeral expenses to relieve the burden on your surviving family members.
- You want to minimize or avoid tax burdens on your beneficiaries.
- You have specific wishes for end-of-life treatments, power of attorney, estate administration, or will executorship.
Estate Planning Checklist
While estate planning can seem overwhelming, following a checklist can help simplify the process and make sense of the proper steps that should be taken for successful planning.
Below, “will” refers to a last will and testament. This is a legal document that includes the wishes of the “testator”—you—for dependent care, assets, and liability distribution and management after death. “Beneficiary” is anyone who will receive bequests from your will, and “executor” is the person you appoint to carry out your will.
- Consult with a Trust and Estate Attorney: An experienced trust and estate attorney will guide you through the process of drafting a secure will while minimizing tax burdens, avoiding probate court, and ensuring assets go to your named beneficiaries.
- Itemize Inventory: List what you own, including tangible (vehicles, property, furniture, jewelry, etc.) and intangible (retirement accounts, life insurance plans, stocks, etc.) assets.
- List Liabilities: Make a list of any outstanding debt, mortgages, lines of credit, and other liabilities that will need to be paid or managed after your death and taken from your estate.
- List Family and Dependents: Include your relationship to any family members and dependents, including pets, that should be included in your will to provide for their needs.
- Gather Updated Documents: Collect recent account statements, safe deposit box/safe content lists, insurance policies, and recent liability statements.
- Choose Your Appointments: Consider appointing someone you trust with powers of attorney and name your estate administrator and executor.
- Designate Beneficiaries: Determine who will receive which assets from your estate. Choose backup beneficiaries that take effect if a beneficiary dies or is unavailable.
- Authorize TOD Designations: Name beneficiaries to receive investment account, vehicle, or property assets by authorizing Transfer on Death (TOD) designations.
- Draft a Will: Hire a trust and estate attorney to draft your will and for personalized legal advice and support. Use a statutory form to create a simplified will (only available in some states) or create a DIY will with software online (not recommended for complex assets, holdings, distribution rules, or debts).
- Review and Sign: Review the contents of your will, then sign it according to your state’s rules with two witnesses present.
Safe storage of your will is essential once it’s completed and signed. Make sure your executor knows where to find it and affix a clear label to the folder containing the will. If digitally storing your will, make sure your survivors have authorized access and know where to find your login credentials upon your death.
Estate Planning Made Easy
Being proactive with estate planning can benefit you and your loved ones and offer peace of mind as you enter retirement age. From creating itemized asset and liability inventories to hiring a lawyer to draft your will, estate planning doesn’t have to be difficult.
Guidance from a financial advisor or planner may be helpful to ensure your state’s rules are followed to prevent your will from being challenged.
A MyStages® consultant can help get you started with estate planning, map out your retirement journey, help ensure your last wishes are carried out, and that your loved ones interests are covered.
