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Guide to Estate Planning: 4 Steps You Can Take to Shape Your Financial Legacy

In the financial planning journey, much emphasis is placed on accumulating wealth and building a prosperous future. However, an equally important (yet often neglected or postponed) endeavor is safeguarding your wealth and making provisions for what happens to your hard-earned finances after your passing.

Estate planning is for everyone regardless of their scale of wealth. Your estate encompasses everything you own, from your cherished possessions and real estate to your bank accounts, investments, and insurance policies. No matter how large or modest your estate is, proper estate planning ensures the efficient transfer of assets with minimal tax burdens and legal fees.

While it’s understandable to be apprehensive about planning for what comes after your lifetime, it’s essential to establish a solid financial foundation. Consider the following reasons to prioritize your estate plan:

  • You can take control of your financial legacy. Reflect on the effort you’ve put into building your wealth only to place the fate of what happens to it into someone else’s hands. 

    Without proper planning, your assets could go through a process known as probate, making them public records and susceptible to potential claims from creditors, entities, or individuals. Besides the potential risk of your assets falling into the wrong hands, this can be a prolonged and costly process.
  • You grant peace of mind to your loved ones. Far too often, people experience the burden of grieving a loss while simultaneously grappling with financial and legal matters during immense emotional distress due to inadequate planning. 

    Prioritizing your estate plan gives your family and beneficiaries the invaluable gift of clarity, enabling them to navigate your affairs and ensure your wishes are honored.

4 Essential Steps for Estate Planning: From Inventory to Organization

Creating an estate plan is not an overnight endeavor or a simple matter of drafting a piece of paper. It’s a multifaceted process that requires careful consideration and ongoing progress. Let’s explore four practical steps you can take to initiate your estate planning journey: 

  1. Take inventory of what you own and owe
  2. Designate beneficiaries on all accounts
  3. Draft your estate planning documents
  4. Organize and secure your documents

1. Take Inventory of What You Own and Owe

Before you draft your estate planning documents, you should begin with a comprehensive inventory. This will provide you with a clear understanding of what you own and owe, allowing for a seamless process when you’re ready to create the documents expressing your final wishes. Your list should include tangible and intangible assets, as well as your liabilities.

  • Tangible assets include real estate, vehicles, collectibles, artwork, furniture, and jewelry. Be sure to include the location of each asset, particularly if you own multiple properties or have assets in various places. 
  • Intangible assets include bank accounts, 401(k)s, IRAs, brokerage accounts, and life insurance policies. Include the contact information of the financial institutions where these assets are held, along with the corresponding account numbers.
  • Liabilities include credit cards (even if paid off monthly), personal loans, mortgages, home equity lines of credit (HELOCs), or any other financial obligations you may have. Liabilities are essential to include because creditors retain the right to file a creditor’s claim following your passing.

2. Designate Beneficiaries on All Accounts

Certain assets fall under non-probate assets, meaning they have designated beneficiaries and can pass directly to them without the court’s involvement. This streamlined and cost-effective approach protects your assets and allows for a transfer without excessive costs or delays. For this approach to be effective, it’s crucial to designate beneficiaries. Unfortunately, it’s not uncommon for accounts to have no assigned beneficiaries, increasing the chances of probate.

Non-probate assets include life insurance death benefits, retirement accounts, payable-on-death bank accounts, and transfer-on-death brokerage accounts or securities. Review your inventory list and ensure each of these assets has primary and contingent beneficiaries assigned. Although jointly owned assets automatically transfer to the surviving owner, consider listing beneficiaries for such accounts as well in the event of simultaneous passing with the joint owner. 

Keep in mind that beneficiaries are not limited to individuals. You can designate entities, such as a non-profit organization, as recipients of some or all of your assets. 

3. Draft Your Estate Planning Documents

The heart of estate planning is getting your legal documents in place. There may be several options available to you. For example, you can directly hire an estate planning attorney, or some employers offer legal benefits that can connect you with an attorney. There are even DIY templates for more basic documents, such as a will, though it’s advised to consult with an attorney.

The documents required to prepare an estate plan can vary depending on your circumstances, but below are several standard documents you may come across: 

  • Will. This powerful legal document communicates your final wishes. It outlines how you want your assets to be distributed and allows you to choose an executor who will carry out the terms of your will. You can also appoint a guardian for any minor children or dependents, if applicable. 
  • Trusts. While a will focuses on asset distribution after death, a trust can hold your assets and provide instructions on managing and distributing them. For example, if you have concerns about spendthrift beneficiaries, you can include provisions for staggered distributions at certain ages or specify how the beneficiaries can use the funds. There are various types of trusts, so consulting with an attorney is crucial to determine the best fit for your needs. 
  • Power of Attorney (POA). This document grants someone the authority to make certain legal decisions on your behalf. Like trusts, there are different types of POAs. For instance, you can designate someone to handle financial matters, make healthcare decisions, or care for minor children in the event you become incapacitated. 

Working on these documents with professional guidance from an estate planning attorney ensures your plan reflects your intentions and provides necessary legal protections. 

4. Organize and Secure Your Documents

Estate planning involves more than creating documents; it also simplifies matters for your family and executors. 

Once your documents are finalized, ensure they are securely stored but easily accessible to those needing them. Along with your documents, consider including your funeral plans (including prepayments, arrangements, and list of contacts to notify), details about valuable items stored in safe deposit boxes or other secure locations, and any additional pertinent information. 

Through this process, you can alleviate any potential burdens and ensure a smoother process for those handling your estate. 

Shape Your Story with Legacy Planning

Undoubtedly, estate planning can be the most challenging aspect of financial planning. However, having a comprehensive plan allows you to take control of your financial legacy by protecting your assets from the complexities of probate while easing the burden on your loved ones. While this process cannot be accomplished overnight, gradual steps are key. Embrace the opportunity to determine how your story concludes.

At Legacy Planning, we specialize in helping you get a comprehensive financial plan in place and can guide you on the next steps of protecting your wealth beyond your lifetime. To discover how we can help you, click here to schedule a conversation today.

Content in this material is for general information only and is not intended to provide specific advice or recommendations for any individual.


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