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When – and How – to Start Your Estate Plan

| November 13, 2018
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When many people think of an estate plan, they often think of a will. In reality, your estate plan can be much more than that – your estate is made up of everything you own, including your car, your home, personal possessions, life insurance, retirement accounts, businesses, investments, and more. An estate plan details what you want to distribute after you pass away or become incapacitated, to whom you want to give it (or who will take control of it for you), and when.

Estate planning can be a complex, time-consuming undertaking, leaving many people overwhelmed and unsure of where to begin.

When to Start an Estate Plan

You don’t have to be older, retired or extremely wealthy to begin your estate plan. In fact, as soon as you have a measurable base of assets, it’s time to get started. It can be tough to think about passing, but it’s better to have a plan in place than to be unprepared when death or incapacity occurs. The sooner you start, the more organized your assets will be when the time comes for your loved ones to receive them. Remember, they will likely be overcome with grief and sorting through your personal financial affairs and distributing your estate can add a needless burden to their emotional state. 

Starting an estate plan begins with three steps:

  1. Decide what you want to achieve with your assets and who you want to inherit them.
  2. Consider who you trust to handle your business affairs and oversee medical care should you become incapacitated.
  3. Seek the assistance of a financial planner to begin putting your plans on paper.

It’s important to start discussing these plans with your heirs as soon as possible, to ensure your loved ones fully understand your plans and to avoid confusion after you’re gone. If you’re unsure about any part of the estate planning process, a financial planner can walk you through it and help you decide how to proceed. They can help you structure your estate and ensure that no unanswered questions remain when the time comes. 

How to Start an Estate Plan

After considering who you would like to inherit your assets, it’s time to put those plans on paper. Here’s how to start:

  • Itemize Your Assets – Work with a financial planner to itemize your assets and determine the tax treatment of each. Your financial planner will likely make recommendations to help you organize and position your assets in a well-diversified and tax-efficient manner.
  • Choose How to Leave Your Legacy – A good financial planner will work with you to develop a detailed, long-term plan to achieve financial independence and security, while helping you leave a legacy for those you love. Whether you would like to provide for your surviving spouse, fund a college education for your children or grandchildren, or leave your assets to a charitable organization, a financial planner can help you plan accordingly. 
  • Build Your Plan – After determining how you would like to distribute your assets, it’s time to start building out your estate plan. Your plan should detail the following, among other items:
    • Your executor, usually a family member, who will handle locating and overseeing all of your assets after you die or become incapacitated
    • How and when to transfer your business (if you have one)
    • Beneficiaries of your life insurance, IRAs and 401(k)s
    • Care instructions for your wellbeing should you become disabled or incapacitated, including details about your long-term care insurance policy
    • Establish a guardian for living dependents
    • Funeral arrangements
    • Power of attorney

Your plan should also ensure your loved ones pay minimal estate taxes, legal fees, and court fees. Financial planners should be well-versed in these items, and can make recommendations to the financial impact on your estate. 

  • Work with a Team – While a financial planner is an essential player in the estate planning process, you must work with a variety of professionals to round out your plan. Experienced financial planners will interact cooperatively with your estate planning attorney and other professionals, often serving as the “conductor of the orchestra.” A holistic financial plan provides an excellent starting point for an estate attorney to begin preparing wills, trusts, health care proxy, power of attorney assignments, and more.

Your estate plan can be an ongoing, evolving project. As your family situation and finances change, update your plan to reflect these shifts. Creating a plan early on can provide peace of mind, ensuring your loved ones are taken care of for years to come.

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