Many people believe estate planning simply means having a will. In fact, estate planning is far more complex than most people understand. It would also surprise many to realize just how much money can be saved by implementing a properly structured estate plan. The following is a list of estate planning tasks that need to be addressed, regardless of age or health.
1- Designate a team of professionals
The complexity of your situation will determine the assistance you will require from professionals to create your estate plan. Your team usually includes a financial advisor, lawyer, and tax planner.
2- Create a Net Worth statement
Your net worth is the value of your assets minus your liabilities. This is very helpful in allowing your executor to distribute your assets.
3- Check your beneficiary designations
Some assets are able to pass directly to your beneficiary without going through the will or being subject to probate. While this increases the efficiency of your estate plan it is crucial that the proper beneficiaries are named. Pension plans, IRAs, annuities, and life insurance policies all require beneficiary designations.
4- Review your life insurance needs
Work with your financial advisor to match your long-term financial objectives with your insurance needs. Proceeds from life insurance policies can be used to replace income, pay estate expenses, or leave an inheritance.
5- Structure your estate to minimize taxes and administration fees
Your estate may be subject to income, estate, or inheritance taxes, depending on the types of assets and the jurisdictions they fall under. Proper structuring of property titles, corporations, and investment accounts can significantly increase the amount of money available to your beneficiaries.
6- Have a will prepared
If you die “intestate”, without a will, state legislation dictates who handles everything, who gets what, and even who cares for your children.
7- Have a Power of Attorney prepared
This legally binding document determines who will make decisions on your behalf if you are unable to manage your own affairs.
8- Create a list of important information
One of the most difficult roles for an executor and family members is gathering the information required to settle the estate. Eliminate this concern by centralizing all household numbers for things such as your birth certificate, passport, bank accounts and insurance policies. Once you have documented your important information, store a copy online and let someone close to you know where it is.
9- Share your plan
After you have gone through all the steps of developing an estate plan, the final piece of the puzzle is communication. It is important to communicate your plans to a family member or close friend whom you can trust, and who is capable of working with your advisor to execute your plan.
10- Review your estate plan
Review and, if necessary, update all information at least once a year. As they say, the one constant is change, and it is important that your estate plan continue to accurately reflect your situation.