Estate planning is about more than deciding who inherits your money or property. It’s about making sure the right people can manage your financial, medical, and personal affairs if something happens to you, and that your wishes are followed after you’re gone. A thoughtful estate plan protects your loved ones, reduces taxes and confusion, and helps your legacy unfold the way you intend.
The process may sound daunting, but breaking it into smaller steps makes it easier to manage. Here’s a practical seven-step checklist on how to get your affairs in order.
1. Create an Inventory of What You Own (and Owe)
Start by listing everything you own that has value. This includes your home, real estate, vehicles, and personal items like jewelry, art, or collectibles. Don’t forget intangible assets—bank accounts, investments, retirement plans, and insurance policies.
Next, list your liabilities: mortgages, credit cards, car loans, student loans, or any other outstanding debts. Having a clear picture of your assets and obligations will make it easier for your attorney to create a plan that reflects your financial reality. It will also help your loved ones manage your estate when the time comes.
2. Determine Your Family’s Needs
Once you know what you have, think about what your family will need if you’re no longer here—or if you can’t make decisions for yourself.
Work with an experienced estate planning attorney to draft a will. This document outlines how your property will be distributed and allows you to name a guardian for any minor children. It’s wise to also name a backup guardian in case your first choice can’t serve.
If you have dependents or a spouse who relies on your income, review your life insurance coverage. Consider whether your family could maintain their lifestyle if you weren’t there to provide for them.
3. Establish Key Directives
A complete estate plan includes several legal documents that protect you and your family in different situations.
You might set up a trust, which allows you to transfer assets to beneficiaries while avoiding probate. With a revocable trust, you retain control during your lifetime, while an irrevocable trust can help reduce estate taxes but can’t be changed once established.
A medical care directive (often called a living will) outlines your wishes for medical treatment if you can’t communicate them yourself. Some states combine this with a healthcare proxy, which names someone to make decisions on your behalf.
Finally, a power of attorney authorizes another person to handle your finances if you become incapacitated. This can include paying bills, managing investments, or handling real estate. You can limit or expand these powers as needed with your attorney’s guidance.
4. Review and Update Beneficiaries
Beneficiary designations on accounts like 401(k)s, IRAs, and insurance policies override what’s written in your will. This means if your will leaves an account to one person but your beneficiary form names someone else, the person listed on the account will receive it.
Check these designations regularly, especially after major life events like marriage, divorce, or the birth of a child. If you leave a designation blank, the state’s default inheritance laws will determine where those assets go—which may not align with your wishes.
5. Understand the Tax Implications
Most people won’t have to worry about federal estate taxes, which apply only to estates worth more than $12.92 million (as of 2023). However, some states impose their own estate or inheritance taxes with much lower thresholds.
If your estate is sizable, your attorney may suggest tools such as a Grantor Retained Annuity Trust (GRAT) or other strategies that reduce the taxable value of your estate. Even if you don’t expect to owe estate taxes, a professional can help ensure your plan is structured efficiently.
6. Work With Experienced Professionals
Estate planning isn’t a do-it-yourself project. Each state has different rules about wills, trusts, and powers of attorney, and mistakes can be costly or invalidate your documents entirely.
An experienced estate planning attorney can guide you through every step, from drafting documents to selecting executors and trustees. Depending on your situation, you may also want input from a financial advisor or tax professional to ensure your plan fits your overall financial goals.
7. Review and Revisit Your Plan
Your estate plan isn’t something you create once and forget. Review it every few years—or sooner if you experience major life changes such as marriage, divorce, the birth of a child, or a significant change in assets.
Even if your personal life hasn’t changed, laws often do. Regular reviews ensure your plan continues to reflect your current wishes and takes advantage of any new opportunities to protect your estate or reduce taxes.
The Bottom Line
Estate planning may feel uncomfortable at first, but it’s one of the most important steps you can take for your loved ones. By preparing key documents, naming trusted individuals, and keeping your plan up to date, you can ensure your wishes are clear and your family is protected.
Think of this checklist as a roadmap—not just for what happens after your death, but for how you want to live with peace of mind, knowing your affairs are truly in order.
Referenced Source: Fox 54, “Estate Planning Checklist: A 7-Step Guide to Getting Your Affairs in Order”