Estate planning provides crucial benefits, such as organization, clarity and peace of mind, to you and your family. Going through the estate planning process allows you to distribute your assets in an efficient and effective manner when you pass. While no one wants to think about mortality, not having an estate plan could mean the difference between leaving your heirs with the care you intended or without. Getting started can be much easier than you would anticipate.
Who Needs an Estate Plan
Wondering if you need an estate plan? Don’t worry, you are not alone. A common misconception is that estate planning is for only high net worth people, and that simply is not the case. Estate planning is something everyone can benefit from, no matter the level of their assets. Also, certain life events are definite signals that you need an estate plan. Changes in marital status and underage children are two obvious ones. Everyone’s situation is unique. While this article will provide an overview of estate planning, an experienced estate planning attorney will be able to work with you as you navigate your own situation.
Where to Start
At the top of your estate planning list is determining what assets and liabilities you currently possess.
Step One: Take inventory of what you have, including your assets and liabilities. List out your bank accounts, credit cards, investment accounts, and insurance policies, as well as assets such as your home, vehicles, collectibles, and other property.
Step Two: Determine who you want each asset to go to. This can be a family member, friend or charitable organization. Remember: if you do not decide, your state’s default rules will decide for you.
Next Steps
Once you have made the above decisions, it is time to get the proper documents together.
Step Three: Last Will and Testament
- Work with a licensed attorney to draft your Last Will and Testament. In this document, you will name your executor to carry out your wishes of where you want your assets to go. If applicable, you will also name a guardian for minor children.
- Your Last Will and Testament goes into effect once you pass and will be overseen by a probate court.
- Note that probate proceedings are public information since they are filed with the court.
Step Four: Advance healthcare directive
- Clearly state your medical care preferences, as well as who can make healthcare decisions for you if you are unable.
Step Five: Financial power of attorney
- Clearly identify who can make your financial decisions if you are ever incapacitated or not able to be present (i.e., you are in the military and deployed).
Step Six: Revocable Living Trust (optional)
- A trust is drafted for you by a licensed attorney
Your trust names trustees and successor trustees whose task is to determine how the trust assets and properties will be managed. - Much like a Last Will, a revocable trust governs where and how you want your assets to pass at your death.
- However, unlike a Will, a revocable trust offers privacy since it is not administered in a probate court.
- The trust goes into effect once it is signed, and assets are titled in the name of the trust.
Step Seven: Designate beneficiaries for each of the following assets:
- Retirement accounts (401(k), 403(b), IRA, Roth IRA)
- Pensions
- Insurance policies
- You may also implement “payable upon death” designations for taxable bank accounts and taxable investment accounts.
- Further, beneficiaries bypass the probate process.
Other Considerations
As you go through the estate planning process, consider the following additional points, as well:
- Review your current titles and deeds. Update as needed.
- Each state has its own estate tax and medical directives laws. Therefore, it is important to work with a licensed attorney when estate planning, instead of trying to do it on your own.
- Every size estate needs a will and medical directive – it is not a high net worth exclusive.
- Have your documents in a location where you and your executor/trustee know where they are. Include a listing of utilities and online accounts or other digital files.
- Include information on your funeral requests.
- Assets, laws and families change. It is important to review and update your estate plan regularly.
Going through the estate planning process may seem daunting; however, it is extremely important. The estate planning process provides clarity to you and your heirs, allowing peace of mind that your instructions will be carried out as you wish.
While this is an overview of the estate planning process, everyone’s situation is different. For a look into your unique circumstances, please reach out to a Sikich Financial advisor.
Sikich Financial does not provide tax or legal advice. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. Before making decisions with legal ramifications, you should consult appropriate professionals for advice that is specific to your situation. This material is based upon publicly available information and is provided for general information and educational purposes only.
About our Authors
Wesley Whamond
With over 20 years of experience in the financial services industry, Wesley Whamond, MBA, CFP®, CPFA®, is a financial advisor on Sikich’s wealth management team. Wes has a passion for partnering with clients to navigate the financial world. In his role, he takes an encompassing, goals-based approach to tailor solutions to the needs of his clients. Wes has in-depth expertise in financial planning, investments, financial education and portfolio reviews. He works with clients from all backgrounds, guiding them along their financial journey.
John Loew
John Loew is a Tax Director at Sikich on the trust and estate team with nearly 25 years of experience in the estate planning area, including 15 years as a practicing estate planning attorney. He regularly works with families, business owners, executives, doctors, and other professionals to grow, manage and protect wealth. He provides clients with comprehensive planning solutions covering a range of services, including core estate planning, business succession planning, complex gifting strategies, inter-generational wealth planning, estate and trust administration, charitable giving and asset protection planning.
