A Guide To Successful Estate Planning

If you’re nearing retirement age, you will be wondering whether you would benefit from making an estate plan.

Anyone who wants their assets to be distributed to their loved ones should consider estate planning. This guide will answer all the questions you might have about estate planning, looking at what estate planning is, the common documents in an estate plan, how to create an estate plan, and any mistakes to avoid. 

What is Estate Planning?

Estate planning is the process of arranging to transfer your assets to your loved ones (usually family members) in anticipation of your death. You can put together an estate plan at any age – whether you’re 30, 60, 90, or anything in between. 

Your estates are the total property, both personal and real, owned by you before you distribute them to another individual or individuals, known as heirs. Personal property includes cars, furniture, and other household goods, and the money in your bank accounts. Real property is your real estate.   

Wills, trusts, insurance policies, or a combination of the three are often featured in an estate plan. Estate planning has been around for a number of decades and is becoming increasingly common today. 

There are lots of things to be aware of when making an estate plan, including estate taxes and how these may be affected by federal law. An expert estate planner can help you with these more difficult aspects of making a plan. 

Do you Need an Estate Plan?

You might be wondering whether you need an estate plan, or whether this type of planning only applies to wealthy people who earn a certain amount of money.

The answer is that everyone needs an estate plan, regardless of how much money you have in your bank or how old you are. Anyone who wants their assets to be distributed to their loved ones after their death needs an estate plan. 

Even if you don’t own a lot of assets, having an estate plan will mean that your wishes are clearly outlined to your loved ones. This is particularly important on the subject of healthcare, as if you become unable to speak for yourself at a later stage in life, your estate plan can speak for you. 

Common Documents in an Estate Plan

The most common estate planning documents are as follows: 

  • Wills – Express your wishes for the distribution of your assets and property.
  • Trusts – A legal relationship between three people that enables the first party to give the second party the rights to hold property and assets on behalf of the third party.
  • Guardianships – State who will look after your dependants if you become incapacitated or after your death.
  • Financial power of attorney – Legal rights given to somebody to handle your finances.
  • Durable power of attorney – A variation of the above, with “durable” meaning that the POA remains in effect even if you become incapacitated.
  • Advanced healthcare directive – States the medical action that should be taken (if any) if you become incapacitated.

How to Create an Estate Plan

There’s a lot to fit into a single estate plan. We’ve outlined the most important steps of estate planning below, but remember that your own planning depends on your individual circumstances. 

  1. Make a list of your assets. Take stock of your personal and estate assets, including any items of value.
  2. Consider your life insurance. Think about how you can protect your family and ensure they can live comfortably when you’re gone with the right life insurance policy. 
  3. Decide on which estate plan best suits your situation. You can use the help of an estate planning expert if you’re unsure.
  4. Choose who you would want your children or pets to be looked after by when you’re gone. Selecting a guardian for your dependents is an important step. It’s also recommended to choose somebody to make financial or medical decisions for you if you ever become unable to make these on your own.
  5. Assess the necessary directives and determine which you need. There a number of directives that are usually feature in an estate plan, including:  
    • Medical care directive
    • Durable power of attorney
    • Limited power of attorney (the less common option, but may be necessary in some situations)
  6. Choose the beneficiaries to your estates. In some instances, you may have already named your beneficiaries. For example, your life insurance policies and retirement accounts will usually require that you name a beneficiary in advance. But many of your assets will be unaccounted for unless you note in your trust or will the person that you’d like to leave them to.
    Beneficiary designations are applicable for when you pass, but they’re not linked to instances in which you become incapacitated. 
  7. Work with a trusted attorney or financial advisor. There are plenty of options for estate planning support nowadays. It’s recommended that you choose a local planner who can work with you on a personal, one-on-one basis to create your estate plan.
    Keep in mind that some options will be more costly than others. But if your estate isn’t overly complex, working with the professionals at Koinonia Financial, and their network of estate planning attorneys should offer the estate planning solution you’re looking for.
  8. Draft up a plan. Once the preparation steps are out of the way, you can draft up a complete estate plan. You may choose to do this using an online program or by hand-writing (the less popular option nowadays). Your estate planner can help you to choose the best option if you’re unsure.
  9. Sign your plan. Your state will require a certain number of witnesses to your signing. Make sure you follow these guidelines – they exist to keep you safe.
  10. Inform your executor of your intentions. It’s good to let your executor know in advance that you have selected them to administer your estates.
  11. Put your documents in a safe place. It’s worth letting your loved ones know where your estate plan is.
  12. Update your estate plan if and when necessary. You may need to occasionally update your estate plan. Major life events, such as the birth of children and grandchildren, the death of someone you included in your plan, divorce, and marriage, may require you to review and update your plan. Even without any major life changes, you should review your plan every 3 to 5 years.

Estate Planning Mistakes & How to Avoid Them

When developing an estate plan, take caution. It’s easier than you’d think to make mistakes that could lead to misunderstandings and inaccuracies. Some of the most common estate planning mistakes to avoid are as follows: 

  • Not having a proper plan in place
  • Not updating your plan if and when necessary
  • Not planning for what should happen if you become incapacitated
  • Not appointing guardians for minor children who require your care
  • Not considering the implications of estate taxes (when applicable)
  • Not planning in advance for tax advantages
  • Not keeping track of/ updating beneficiary designations

Making the right arrangements for the transfer of assets after your passing will allow for a much smoother distribution process, relieving your loved ones of the stress, hassle, and even monetary consequences of dealing with errors and delays. 

Estate planning certainly isn’t easy. You can read all the manuals and guides in the world and still be left scratching your head, wondering exactly how to get started.

An estate planning expert can support you through the process, helping you to make a careful and considerate estate plan that reflects your current and future personal situation.

If you want to get peace of mind from knowing that your will trusts, powers of attorney, beneficiary designations, and property ownership are in order, working with a financial planning professional is highly recommended.

This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation. Koinonia Financial and LPL Financial do not provide legal advice or services.

Posted in