Estate Planning: A 6-Step Checklist of the Basics

You don't have to be rich to do Legacy Planning. Everyday people benefit just as much from Legacy Planning because it helps to protect their hard-earned assets for the next generation. Your Legacy is made up of the assets and includes everything that you own.

What is Legacy Planning?

Legacy Planning is the process of choosing who will receive your assets and leaving instructions on how to handle them when you pass away. Legacy Planning also helps you minimize estate tax, gift tax, income tax and other taxes. Below are seven basic steps of Legacy Planning.

1. Conduct An Inventory

Many people believe that they do not have enough assets to begin Legacy Planning. This couldn’t be further from the truth. If you have a car or a bank account or a life insurance policy, then you should strongly consider beginning to plan your Legacy. If you have any of the following then you undoubtedly need to meet with a Legacy Planning Attorney:

• Homes, land or other real estate

• Collectibles

• Checking and savings accounts and certificates of deposit

• Stocks, bonds and mutual funds

• Retirement accounts such as a 401(k)

• Business Ownership

Once you conduct an inventory of all your estate’s assets, you can get a sense of what the overall value of your estate is. This will make it easier to navigate the rest of the Legacy Planning process.

2. Prepare For Your Family’s Needs

Next, you should begin thinking about how you will distribute your assets to protect your family’s future needs. Some basic things you need to consider are if you have enough life insurance to provide support for your heirs, does your child have a guardian (and a back-up guardian), and who you want the Personal Representative of your estate to be (the Personal Representative is the person who is responsible for directing the affairs of your estate).

Another consideration that is part of thoughtful Legacy Planning is understanding the personalities of the loved ones who you want to benefit from the assets of your estate. We find that people are often preoccupied about the value of assets, rather than the people who will inherit the assets. In our experience, it is more important to give the right asset to the right loved one so that it is not wasted.

3. Establish Your Directives

To give your estate the maximum protection possible, you need to have several legal directives in place. Such directives include a medical care directive that gives your loved ones guidance on how you would like to receive care should you become incapacitated and a durable financial power of attorney that allows someone else to manage your finances if you are unable to do so. These documents will ensure that your affairs are properly taken care of in the event that anything happens to you.

4. Review your beneficiaries

You also need to review your retirement and insurance accounts to keep track of your beneficiary designations. By law, your beneficiary designations will trump the designations in your Will so you want to be sure that all of your designations are consistent. For example, if your ex-spouse is still a beneficiary on your life insurance policy, your current spouse will likely not be able to inherit the proceeds of your policies.

You must also remember to name contingent beneficiaries. These backup beneficiaries are critical if your primary beneficiary passes away before you do.

5. Be mindful of your state's estate tax laws

Estate planning is often a way to minimize estate and inheritance taxes. But most people won't pay those taxes. At the federal level, only very large estates are subject to estate taxes. For 2020, up to $11.58 million of an estate is exempt from federal taxation. In 2021, up to $11.7 million is exempt.

Some states also have estate taxes, as well as inheritance taxes. Your Legacy Planner can help you assess all of the taxes that your estate may be responsible for paying.

6. Plan to update your Legacy Plan

Your Legacy Plan is not a set of static documents: it should change as your life changes. Review your Legacy Plan whenever your circumstances change, including but not limited to marriage, divorce, birth of a child, and upon purchase of new property.

If you would like assistance creating a Legacy Plan or reviewing one that you’ve already created, please fill out the form below and a Legacy Planning attorney from our office will contact you.