Tag: 5stepplan

An Estate Plan in 5 Easy Steps

Estate Plan

An effective estate plan is something that doesn’t just come together overnight.  It takes some planning on your part and you shouldn’t neglect these things.  In the uncertain world we live in, it never hurts to put in a little leg work now so that when the time comes, your family isn’t stressed out by having to tie up lots of loose ends or worry about their future.

Below is a list of 5 Steps we think are extremely important for each person to do, regardless of wealth. 

Make an Inventory

You have many things that you have accumulated over the course of your life both tangible and intangible. You may not think you have enough to worry about, but to be very frank, you would be surprised by what all you’ve got. 

Tangible assets like cars, boats, houses, jewelry and other real estate are all things you need to account for. If you own these things free and clear, that’s great, otherwise you’ll need to let your heirs know who holds mortgages or loans on the items in question. 

You also likely have intangible assets.  Things like 401(k)s or other retirement plans like pensions or IRAs.  You may also have life insurance, bank accounts, ownership in a business or stocks and bonds.  You’ll need to leave a detailed list of where each of these assets are and how you access them.  

You don’t want your heirs spending their precious time looking for things or for those things to ultimately end up where you don’t want them to go. 

Account for your family’s needs

If you’re married and/or you have children who depend on you, you’ll also want to make sure that you have something in place to take care of their needs until such time as they’re able to do that themselves.

If you have someone who depends on your income, you’ll want life insurance from a highly rated company. (I’ll link to the A.M. Best list of top life insurers here)  How much you need depends on your individual circumstance, but generally speaking for each million dollars you have in life insurance, you’ll be able to safely generate about $30,000-$50,000  per year in income if invested wisely.  

If you have children and you’re not married, you’ll also need to designate a guardian if the children are under 18 or have no other surviving parent.  Don’t take for granted that your children will end up with the relative you want them to live with.  Custody battles have torn extended families apart.  

Finally, if you have children, you’ll want to make sure that you document how you would want them raised.  Don’t assume a guardian would raise your children in the way you want them brought up if you don’t specifically express that in your directives.  Guardians should be named in a will or other binding legal document and you should discuss with your guardians how you want your children raised BEFORE you name them in your will. 

Establish your directives

A key tenant of any good estate plan is a medical care directive, also known as a living will, will give your family guidance in how you wish for your medical care to progress should you find yourself unable to make those decisions. 

There are also powers of attorney that exist that give people the ability to direct your financial life should you become incapacitated.  You need to be careful with these documents though and make sure you fully understand them before assigning those powers to just anyone.  

Finally, you’ll want to have a will in place. A will is a legal document that directs your executors (those you choose to carry out your final wishes and disperse the assets of your estate) in settling your final debts and dispersing any inheritances you wish to leave to people. It is the final LEGAL piece of any good estate plan. 

Review your beneficiaries

Many assets can pass to people you designate outside of the probate process.  Bank accounts, life insurance, retirement and pension accounts all have beneficiaries that can be listed as P.O.D. (pay upon death).  In this scenario, these assets can pass to someone outside the probate process.  The problem is that if you leave someone as a beneficiary, it will pass to them REGARDLESS of your wishes laid out in your will.  In other words, if you named an ex or someone else you don’t want to get the money as a beneficiary, it will go to them regardless.  It’s always a good idea to review beneficiaries periodically and especially after major life events like a birth, death, marriage or divorce.  

Plan to reassess

This may seem redundant, but you always need to be reassessing how you want your estate handled.  Your state in life may change, you may get married, divorced, have children, inherit from another relative or have any number of changes in fortune over the course of your life.  Keeping a good, updated plan in place is imperative to those you leave behind.  Not only because it ensures your wishes are carried out, but it also ensures that when your heirs are dealing with grief and/or other uncomfortable situations, they know and are reassured by your written wishes. 

While many of these steps can be taken without the help of an attorney, having wills, powers of attorney and medical directives drafted by a knowledgeable attorney can ensure that your final wishes are carried out and unlikely to be overturned. When you’re ready to take steps to ensure the future of your family and discuss your estate plan, give us a call.