Eight simple estate planning steps

There are many reasons why everyone should consider estate planning. Having a set estate plan ensures your financial, family and health goals are carried out according to your wishes when you die or are incapacitated. Dying without an estate plan can cause family strife, confusion and added expenses. If you die without a will or living trust, the job of managing and disposing of your assets, even the custody of your children, passes into the hands of the courts.
No one likes to contemplate their own death, but here are some simple steps to prepare for the inevitable:
  1. Family communication: In many families, death and money are almost forbidden subjects. Yet some frank discussions with children (or parents) can help everyone be prepared for the unexpected. At a minimum, key family members should know the whereabouts of important documents and be aware of any medical treatment options you want or don't want.
  2. Your will or living trust: These legal documents dictate how your assets are distributed from your estate and can be used to designate legal guardians for dependents. These are decisions you, not the courts, should make. The person named in your will, as executor of your estate, or the trustee(s) named in your living trust, will oversee the estate until all assets are distributed and the estate officially ceases. Choose someone that is capable of understanding and carrying out your wishes.
  3. Your retirement accounts: You should carefully choose the beneficiary of any retirement plan you have, including IRAs. In most cases, the person who will get the assets in your retirement account is determined by the beneficiary form you sign and not by your will.
  4. Irrevocable life insurance trusts: When you hear that life insurance proceeds are tax-free, it is only referring to income taxes. If your estate is the beneficiary of a life insurance policy, the proceeds of that policy are included in your taxable estate. In many cases, those proceeds are what increase the size to the point where estate taxes are due. By having your life insurance policy owned by a life insurance trust, you can keep the death proceeds out of your taxable estate and potentially reduce any estate taxes that may be due.
  5. Durable power of attorney for finances: This document gives another person the ability to make financial decisions for you if you become incapacitated and unable to make your own decisions. If this power of attorney is invoked, that person can access your accounts, pay bills, write checks and handle your investments without going to court to get approval for transactions.

    In this power of attorney, you should choose someone that is capable and knowledgeable enough to make decisions on your behalf. It may be an adult child, sibling or trusted friend. If you don't have someone like that, you may want to designate your attorney or accountant.

    The important thing to keep in mind is that any power of attorney designations cease at your death. This is another reason it is important to make sure you have a will or trust established.
  6. Medical directives: These documents direct how health care decisions are to be made if you are not capable of making them yourself. A durable power of attorney for health care gives another person the ability to make medical decisions and a living will tells your family and medical personnel how you are to be treated if you become terminally ill. It also states your wishes about being placed on life support. Some states may require two forms.
  7. Regular estate planning checkups: Estate plans should be reviewed on a regular basis. Many estate attorneys suggest a review every three or four years. If your situation changes (divorce, death of a spouse, birth of children or grandchildren, changes in wealth status), you may want to review your plan more often. In addition, if you move to another state, be sure to get an estate plan review.
  8. Use an expert: The estate laws are complex and the consequences of being inadequately prepared are significant. While you may want to do some investigation on your own, using a qualified attorney for your estate planning needs is a good idea.

We can help

If you have additional questions, visit one of our branches or call us at 1-800-288-3425. We can help you review your beneficiaries and provide advice for structuring your accounts to reduce the impact of estate taxes.