2024 is coming to a close, and if you haven’t taken action on your estate plan as you wanted to this year, there’s hope! This is a comprehensive list of 16 things you should consider before you die. I suggest you print this out and “divide and conquer.” First, read through it all now; there is a lot of information at the end you’ll want to review before you begin. Then work your way through 1-6 during October, 7-11 in November, and 12-16 in December. A painless way to prepare yourself to kick off 2025 and be ready to take on your plan. What could be easier? Not everyone will need to do something about each point; it depends on your unique situation.
This article was published online at Investopedia on May 19, 2024, and was written by Troy Segal.
“When Aretha Franklin died intestate—without a legal will—in 2018, she joined a surprisingly long list of prominent people, including Prince, who did the same.12 By not preparing an estate plan, she complicated the task of settling her affairs for her survivors. While your estate may not be as large or complex as a famous singer’s, it’s just as important to have a plan in place in the event of your death.
Key Takeaways
- Account for all of your assets and wishes to ensure that your plan is executed smoothly after your death.
- Keep written lists (and inform your estate administrator of the location of those lists) so that none of your assets or wishes are neglected.
- Designate beneficiaries on your retirement accounts to ensure that the money passes smoothly to your heirs.
What Is Estate Planning?
Estate planning is putting your affairs in order so that your loved ones are taken care of if you die or are incapacitated. A will is an essential piece of the plan. So are lists of your assets and obligations, with details of all open accounts. Make sure you record your beneficiaries on your retirement and investment accounts so there’s no delay in transferring the money.
Which Legal Documents Do I Need?
First and foremost, everybody needs a will. No matter how modest your assets are, you’ll want them to get into the right hands with no unnecessary delay or expense.
Beyond that, consider one or both of the following, depending on your circumstances:
- A trust. This is a legal contract that will allow an individual you name (the “trustee) to manage and oversee the assets you bequeath for the benefit of the people you name. If you have dependent children or elderly family members who are unable to fully manage their own affairs, a trust will help them. Very wealthy people often have them, in part so that they can manage their assets for multiple generations.
- Power of attorney. This document grants a trusted person you name (your “agent”) to act on your behalf if you become incapacitated. This permission can be as broad or as limited as you choose. For example, it can cover medical decisions or financial decisions, or both.3
An Estate Planning Checklist
Estate Planning goes well beyond drafting a will. Thorough planning means accounting for all of your assets and ensuring that they transfer as smoothly as possible to the people or entities you wish to receive them.
You need a plan, and you must make sure that your intended heirs have all of the information they need to carry it out.
Not sure how to get started? Follow this checklist, and you’ll have covered all of your bases.
1. Itemize Your Inventory
To start, go through your home inside and outside, and make a list of all valuable items. Examples include the home itself, televisions and computers, jewelry, collectibles, vehicles, art and antiques, lawn equipment, and power tools.
As you go, you might add notes if you come across something that you want to leave to a particular person.
Don’t forget possessions of mainly sentimental value like family pictures. Make a note of possessions you want to donate to a favorite charity.
You might take pictures to shortcut the project and avoid confusion.
The list may be a good deal longer than you expected.
2. Document Your Non-Physical Assets
Add your financial assets and entitlements to the list, with enough specifics that they can be claimed by your heirs.
This includes bank and brokerage accounts, 401(k) plans, IRAs, life insurance policies, and any other policies such as long-term care, homeowners, auto, disability, and health insurance.
Include the account numbers and specify the location of any physical documents you have in your possession. List contact information for the firms holding these non-physical possessions.
If it makes it easier, attach a recent statement or another paper document that indicates the critical information like account number, company, and contact information.
3. Assemble a List of Debts
Make a separate list for all of your open credit cards and other obligations. This could include auto loans, mortgages, home equity lines of credit (HELOCs), and any other debts or open lines of credit you have.
Note the account numbers, the location of signed agreements, and the contact information of the companies holding the debt.
Include all your credit cards, noting which ones you use regularly and which ones are sitting in a drawer unused.
This is another chore that can be made easier by attaching a recent statement or other document that lists the critical account information.
It’s generally a good practice to run a free credit report on yourself at least once a year. This will also identify any credit cards you may have forgotten you have.6
4. Make a List of Memberships
If you belong to any organizations such as AARP, The American Legion, a veteran’s association, a professional accreditation association, or a college alumni group, make a list of them.
In some cases, these organizations may offer accidental life insurance benefits (at no cost) for their members, and your beneficiaries may be eligible to collect.
Include any other charitable organizations that you support. You can let your beneficiaries know which charitable organizations or causes are close to your heart and to which you might like donations to go in your memory.
Make a note of any automatic donations you make regularly to a charitable organization so that your heirs can cancel them or take them on.
5. Make Copies of Your Lists
When your lists are complete, date and sign them and make at least three copies. The original should be given to your estate administrator (more on that below).
The second copy should be given to your spouse or other main beneficiary and placed in a safe deposit box.
Keep the last copy for yourself in a safe place. And don’t forget to tell a couple of your family members where it is. Don’t make them tear up the floorboards looking for it.
6. Review Your Retirement Accounts
Accounts and policies that have designated beneficiaries will pass directly to those people or entities upon your death.
Be aware that it doesn’t matter how you direct that these accounts or policies be distributed in your will or trust. If there’s a conflict, the beneficiary designations associated with the retirement account will take precedence.
Check your online account or contact your employer’s customer service team or plan administrator for a current listing of your beneficiary selections for each account. Review them to make sure they’re current. This is especially important if you have divorced and remarried.
7. Update Your Insurance
As with retirement accounts, life insurance and annuities will pass directly to your named beneficiaries. If you have life insurance, make sure your beneficiaries are up to date and listed correctly.
In terms of timing, this might be the most critical part of your estate plan. Your heirs will need immediate access to some of your assets for their daily needs as well as to plan for your funeral.
8. Authorize “Transfer on Death” Designations
Depending on your state’s laws, your heirs might have to go through a probate court procedure before your assets are distributed. Probate is always required if a person dies intestate.
This process, in which your assets are distributed per court instruction, can be costly and time-consuming.
Many assets, such as bank savings, CD accounts, and individual brokerage accounts, are unnecessarily probated every day. If you hold these accounts, they can be set up—or amended—to have a transfer on death (TOD) designation, which allows the beneficiaries to receive the assets without going through the probate process.
Contact your custodian or bank to set this up on your accounts.
9. Choose a Responsible Estate Administrator
Your estate administrator or executor will be in charge of administering your will when you die. It is important that you select an individual who is responsible and competent to make decisions.
Your spouse is not necessarily the best choice. Think about how the emotions related to your death will affect this person’s decision-making ability.
If you foresee any issues, consider other qualified individuals. You might name a close friend or another family member who you trust to act impartially on your behalf.
10. Draft Your Will
Everyone over the age of 18 should have a will. It is the rulebook for the distribution of your assets, and it could prevent havoc among your heirs.
It’s best done as soon as you have prepared all of the documentation described above. Your list of assets will make it easier to decide who gets what.
A will can also name a guardian for your minor children and designate who should care for your pets. You can leave assets to charitable organizations through your will, too.
Wills are relatively inexpensive state-planning documents to compose; many attorneys can help you craft a will for less than $1,000, depending on the complexity of your assets and your geographic location.
Make sure that you sign and date your will in front of two non-related witnesses, who should also sign the document. Then have it notarized.
Finally, make sure other people know the location of the document so they may access it when needed.
11. Regularly Review Your Documents
Review your will for updates at least once every two years and after any major life-changing events like a marriage, divorce, or the birth of a child. Life is constantly changing, and your assets and wishes are likely to change from year to year, too.
12. Copy Your Administrator
Once your will is finalized, signed, witnessed, and notarized, make sure that your estate administrator gets a copy.
The original should be kept in your home or in your attorney’s office, you should also keep a copy in a safe place at home.
Only the original will—the “wet signature” document, in estate-planning lingo—can be filed for probate.
13. Visit an Estate Attorney or a Financial Planner
You may think that you’ve covered all your bases, but it’s a good idea to consult with a professional on a full investment and insurance plan. And if it’s been a while, you may want to revisit your plan.
As you get older, your needs may change, such as figuring out if you need long-term care insurance and protecting your estate from a large tax bill or lengthy court processes.
Professionals are up on changes in legislation and income or estate tax laws, which could impact your bequests.
14. Simplify Your Finances
If you’ve changed jobs over the years, you may have several 401(k) retirement plans still open with past employers or even several different IRA accounts. You may want to consider consolidating these accounts into one individual IRA.
Consolidating accounts allows for better investment choices, lower costs, a larger selection of investments, less paperwork, and easier management for both you and your heirs.
15. Complete Other Important Documents
At a minimum, you should create a will, power of attorney, healthcare proxy, and living will.
Consider setting up both financial and medical powers of attorney so that people you trust will be there handling your affairs should you become incapacitated.
You can also write a letter of instruction to leave step-by-step instructions as well as spell out your personal wishes for things like your funeral or what to do with your digital assets like social media accounts.
If you’re married, each spouse should create a separate will, with plans for the surviving spouse.
Finally, make sure that all the concerned individuals have copies of these documents.
16. Take Advantage of College Funding Accounts
You may want to set up 529 college savings plans for your grandchildren as part of your estate plan.
In these plans, savings grow tax-free, and many states offer tax deductions for the person contributing the funds.
What Are the Most Common Estate Planning Mistakes?
The biggest and, sadly, the most common, estate planning mistake is not doing it at all. Your loved ones will be thrown into chaos if you die without a will in place and a comprehensive list of your assets and liabilities.
It is equally important to plan for the possibility that you will become incapacitated. It’s crucial to have a power of attorney, healthcare proxy, and living will in place.
Other common mistakes, according to the site Trust & Will, include:
- Failing to communicate. Talk to your loved ones about your estate plan. Tell them what you’ve decided and why. Make sure they know the practical facts, like who your attorney is and where the will is stored.
- Naming only one beneficiary. You may expect to leave everything to your spouse or a child. But you need a secondary beneficiary, just in case.
- Forgetting your digital footprint. Tell your heirs how you want them to handle your LinkedIn account, Facebook account, email, and any other website where you have a presence.
- Not updating. Review your plan once a year to make sure it still reflects your wishes and covers all the bases.
What Are the Essential Documents in an Estate Plan?
Number one is the will of course. Beyond that, the essential documents in an estate plan include:
- An inventory of your physical assets.
- A list of all of your financial accounts.
- A list of all of your debts and open credit accounts.
- A clear identification of your life insurance account with contact details.
Beyond those pieces of paper, go to your online accounts or contact their customer service departments to make sure your beneficiary designations are in place.
What Are the Risks of Not Having an Estate Plan?
If you don’t have a will or your intentions or unclear for any other reasons, your estate will wind up in probate court.
That means that a probate judge will determine what should be done with your assets, based on your state’s laws.
Moreover, if you die without leaving clear documentation of your assets and where they are, your surviving family members will be hard-pressed to locate and claim the money and possessions you want them to have.
In short, not having a will and not documenting your assets leaves a big mess for your heirs.
The Bottom Line
Procrastination is the biggest enemy of estate planning.
While none of us likes to think about dying, improper or no planning can lead to family disputes, assets getting into the wrong hands, long court litigation, and excess money paid in estate taxes.
So pick a time to get started. To quote Benjamin Franklin, “By failing to prepare, you are preparing to fail.”
Please print this document now while you’re thinking about it. By breaking it down, our January meeting to create or update your plan will be time-efficient and help ensure you will have the perfect plan for your hard-earned assets and loved ones. Call me or reach out through my website in late December or early
Phone: 513-399-7526.
Website, www.davidlefton.com
Source: Investopedia May 19, 2024 and written by Troy Segal.