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How to Create an Estate Plan Thumbnail

How to Create an Estate Plan

Estate & Trust

Estate planning may feel overwhelming at times, but sometimes it’s just a question of where to start. No matter your net worth, you need a plan set in place that can help your heirs understand your final wishes and distribute your estate properly. As you prepare to discuss your wishes with your financial advisor, here are a few tips and considerations to keep in mind.

Name an Executor

After your passing, you’ll want to have somebody in place who can execute your wishes. This person is aptly named an executor.

Many people choose a spouse, sibling, child, or close friend as executor. In most cases, the job is fairly straightforward. Still, you might give special consideration to someone who is well organized and capable of handling financial matters. Someone who is respected by your heirs and a good communicator also may help make the process run smoothly.

Above all, an executor should be someone trustworthy, since this person will have a legal responsibility to manage your money, pay your debts (including taxes) and distribute your assets to your beneficiaries as stated in your will.

If your estate is large or you anticipate a significant amount of time for your executor, your executor might think of hiring a lawyer or financial professional. These individuals will typically charge a fee, which would be paid by the estate.

Understand Estate Taxes

Tax planning should be an integral part of your estate planning strategy. You’ll want to work with a tax professional who can help you navigate state inheritance laws and federal estate taxes. The 2017 Tax Cuts and Jobs Act raised the federal estate tax exemption significantly, making it easier for families to maintain their estate when transferring to loved ones. Estates with combined gross assets under $11,700,000 (for individuals) are not required to file an estate tax return.1 However, the estate tax exemption is set to sunset at the end of 2025, meaning the exemption will likely drop back to what it was prior to 2018, roughly half.

Prepare Your Health Care Documents

Healthcare documents spell out your wishes for health care if you become unable to make medical decisions for yourself. They also authorize a person to make decisions on your behalf if that should prove necessary.

These documents may include:2

  • Living will
  • Power of attorney agreement
  • Durable power of attorney agreement for healthcare

Write a Letter of Intent

A letter of intent is a non-legal document that outlines your wishes.3 A strong, well-written letter may save your heirs time, effort, and expense as they administer your estate. It acts as a message from the deceased and can include an array of information from providing organization and outlining last wishes, to detailing information and sending personal messages. Consider including instructions for your funeral arrangements and other details that are important to you.

Organize Your Documents

After your passing, you’ll want your heirs and executor to be able to easily obtain and access important documents. 4

These documents may include:5

  • Your will
  • Trust documents
  • Life insurance policies
  • Deeds to any real estate, and certificates for stocks, bonds, annuities
  • Information on your financial accounts and safe deposit boxes
  • Information on your retirement plans
  • Information on any debts you have: credit cards, mortgages and loans

Talk to Your Family

Do you have stepchildren and ex-spouses? Have you been caring for any foster children? Have you been caring for a grandchild, want to provide for a family pet? With the help of a financial planner and an attorney, you can structure a will or trust that accounts for everyone you wish to provide for. The clearer and more specific you can be the better, as you will reduce the amount of confusion among your family. Otherwise, everyone who thinks they deserve something from your estate may try to extract it in probate and create delays going against your wishes.

There are many factors to consider when creating a will or trust. Before diving into the estate planning process, you should consult with a seasoned financial professional and estate planning lawyer. They will help you make sure you’ve covered all the bases when working to plan for your passing.

  1. https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax
  2. https://tobininvestmentplanning.com/financial-tips/national-healthcare-decision-day
  3. https://tobininvestmentplanning.com/financial-tips/estate-planning-letter-of-intent
  4. https://tobininvestmentplanning.com/client-portal/ (personal document locator download now)
  5. https://tobininvestmentplanning.com/financial-tips/financial-decisions-after-losing-a-loved-one