For many people, mapping out an estate game plan is something they intend to think about later. But too often, later never comes.
The reasons for not dealing with estate planning now may include not wanting to confront your mortality or create family conflict. Or perhaps you don't want to discuss money with your heirs or give your wealth to certain family members you don't trust.
However, a well-designed estate plan can help build wealth, minimize taxes and ease the difficulties your loved ones face after you die. And with the help of your estate planning advisor, the process may not be as burdensome as you might think.
Beginning the Process
The first step is to review your assets so you know what needs to be allocated, including:
Subtract your total liabilities from your assets to get your net worth. Include as liabilities:
Identify potential tax problems so you can determine a course of action to minimize them.
Decide who your beneficiaries will be, recognizing that this may change along with the circumstances of your life. With a few exceptions, any person or organization you choose may receive property from your estate. Typically, beneficiaries include a spouse or partner, parents, siblings, children and stepchildren. You may also want to include other relatives, friends and charities.
Fundamental Planning Tools
Depending on your state of residence, you may need some or all of the following documents, which may require regular review and updates as your situation or thinking changes:
Last Will and Testament. This legal document provides details about how you want your assets distributed after debts and taxes are settled. Your will designates who will oversee the execution of your estate, and it may name who will care for your minor children.
Trusts. These financial instruments help you control the distribution of your property. A trust may be desired to maximize tax savings through gift giving, to avoid probate, to help a disabled beneficiary or to make charitable gifts.
Durable Power of Attorney. This lifetime document allows you to designate a representative to perform certain financial actions on your behalf if you become ill, incapacitated or otherwise unable to manage your affairs.
Living Will. This is a written declaration of the life-sustaining medical treatments you will or will not allow.
Health Care Proxy. This document names a person who will make medical decisions on your behalf if you become incapacitated.
As each state has its own terminology or legal requirements for the way these documents are constructed, it is important to consult with your estate planning advisor.
Letter of Instruction
There are other issues to be considered as you plan, and you may want to include them in a Letter of Instruction to the executor or personal representative of your estate. The letter, which is meant to be a helpful guide, should include:
Make sure you tell the executor or personal representative, and another person close to you, where the Letter of Instruction is kept.
Remember, your needs and wishes often change as life evolves. Consult with your estate planning advisor on a regular basis about keeping your documents up to date.
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