10 Estate Planning Considerations

It’s easy to put off…no one likes to think about death or how things will be when you’re gone. But comprehensive estate planning is essential when it comes to arranging and distributing your assets after you pass. The peace of mind that comes to you when you know your assets will efficiently flow to the people you choose, in a tax-efficient manner, can be priceless.

Estate planning is an important topic, so this month MoneyLetter provides you with ten planning considerations to keep in mind when doing estate planning

Creating a will:

A will is a legal document that outlines your wishes regarding the distribution of your assets after your death. It is important to create a will to ensure that your wishes are carried out. Start with taking an inventory of all the assets that you own. It is important to have a clear understanding of what you own, its value, and how you want it to be distributed. Ensure that it is properly drafted, executed, and kept up to date with changes in your life. In the absence of a will, the court will appoint an executor, which may not settle the estate as you intended. Best to document that in a properly written will.

Choosing an executor:

The executor of your estate is the person responsible for carrying out the instructions in your will. It is important to choose someone who is responsible and trustworthy. Consider the age of that person, the location of that person, their capacity to serve, and their level of expertise. Conflicts can be avoided if this selection is carefully thought out in advance.

Designating beneficiaries:

Beneficiaries are the people or organizations who will receive your assets after your death. You should designate beneficiaries for all your assets or use a “transfer on death” or TOD, where applicable. Make sure all your beneficiary designations are up to date on your life insurance, retirement accounts, and other assets that pass outside of probate.

Considering estate taxes:

Estate taxes can reduce the amount of your estate that is passed on to your beneficiaries. Proper planning can minimize their impact. Speak with an attorney or financial advisor to discuss tax planning strategies. It is important to consider the potential estate tax consequences of your estate plan. Consider leaving a portion of your estate to charitable organizations that are important to you — this can also provide tax benefits. Don’t forget state estate tax implications.

Planning for incapacity:

Incapacity planning involves preparing for a situation where you become unable to make decisions for yourself. You should consider creating a durable power of attorney, or POA, and healthcare directive to appoint someone to make decisions on your behalf. A POA allows you to appoint someone to make financial or medical decisions for you if you become incapacitated. Health Care Directives, such as a Living Will or Health Care Proxy, allow you to express your wishes about medical treatment and end-of-life care.

Protecting assets from creditors:

Asset protection planning involves taking steps to protect your assets from creditors. This can include creating trusts or structuring your assets in a way that makes them difficult for creditors to reach.

Planning for business succession:

If you own a business, you should consider how it will be passed on to your heirs after your death. This may involve creating and funding a buy-sell agreement or setting up a trust. It is important to have a plan in place for its succession, whether it is passing it on to family members, selling it, or shutting it down.

Minimizing probate:

Probate is the legal process of distributing your assets after your death. It can be time-consuming and expensive. You should consider taking steps to minimize probate, such as creating a living trust. Trusts can be an effective way to protect and distribute assets, especially for those with large estates or special needs beneficiaries. Speak with an attorney to determine if a trust is appropriate for your situation.

Reviewing and updating your estate plan:

Your estate plan should be reviewed and updated regularly to ensure that it still reflects your circumstances, your wishes, and meets your needs.

Seeking professional advice:

Estate planning can be complex, and it is important to seek the advice of a professional, such as an attorney or financial planner, to ensure that your estate plan is effective and meets your goals.

It is important to review and update your estate plan regularly, especially after major life events such as marriages, divorces, births, deaths, or significant changes in your financial situation. Improper estate planning can lead to costly mistakes that can cause significant financial and emotional distress for your loved ones. It is essential to consult with an experienced estate planning professional to help you avoid these mistakes and ensure that your wishes are carried out.

By Kent A. Fitzpatrick, AIFA, GFS

Kent is a Contributing Editor for MoneyLetter, the Managing Director of Asset Strategy, and an Accredited Investment Fiduciary Analyst

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