7 Steps to Creating an Estate Plan For Life

estate plan

Many people fail to create an estate plan because they don’t truly understand what is involved and therefore believe it is too complicated. But the real truth is that creating an estate plan during your lifetime is far less complicated (and less expensive) than what your family will deal with after you are gone, if you don’t:

1. Create a Trust. When most people think of preparing for the end of life, they think of writing a Will. But having a Will without a Trust is a fast track to putting your family in the Courthouse after you’re gone. Instead, to keep your family out of Court, you’ll want to set up a Trust and title all of your assets to be owned by that Trust. While it might feel like a lot of effort up front, it will save your family a LOT of trouble after you’re gone, and it only takes a couple of days to gather the necessary statements and financial information. Plus, a lot of my clients have stated that putting all their financial information in once place that was easily accessible was something that had been on their “to-do list” anyways!

2. Designate beneficiaries. Properly designating beneficiaries for your retirement accounts and insurance policies is CRITICAL because these assets typically do not pass through your Will or Trust. Filling out beneficiary designation forms for each of your accounts will ensure these assets pass to the people you want to have them and, as a result, these assets will stay out of the Court system. Be sure to review your beneficiary designations periodically to be sure they align with your current circumstances. Hot tip: NEVER name minor children as beneficiaries of your retirement account or life insurance policies AND if you have more than $150,000 in a retirement account, consider a special trust called a Retirement Trust to ensure the most beneficial tax treatment for your loved ones.

3. Avoid estate taxes. Most of us will not have to worry about estate taxes since the federal estate and gift tax exemption is $5.34 million ($10.68 million for married couples) in 2014 and indexed every year for inflation. However, if you are married and wish to take advantage of portability – where spouses are entitled to each other’s unused exemption – the surviving spouse must file the required paperwork to claim the exemption.

Plus, 15 states and the District of Columbia have state estate taxes, so you could still owe even if your estate is too small to owe federal tax. One of the (many) great things about living in California, is that we do not have a separate state estate tax. So, 99.9% of CA residents won’t have to worry about the federal estate tax if they pass this year. However, as with everything in Congress, it is only “permanent” until Congress decides to make it “un-permanent.”

The big key here is to not just leave a set of documents that your family will have to figure out after you are gone, but give them the gift of a trusted advisor to turn to.

4. Leave a letter of instruction. Not everything you may wish to pass on to your heirs – like instructions for your funeral – should be put in your Will or Trust. Leaving a letter of instruction with your family or attorney can ensure your final wishes are respected. And take it one step further with a Family Wealth Legacy CD or DVD in which you record your values, insights, stories, and experiences for your loved ones to refer back to for generations to come! We provide this service at no additional charge for our clients because we know this is one of the things families value the most and is least often handled. We have a professional videographer and acting coach on hand to work with you and your family to leave a professionally edited “Priceless Conversation” for future generations.

5. Sign a durable power of attorney. At its very core, Estate planning is about life – not just about death. By working with a Personal Family Lawyer to craft a plan that grows with you and your family as your life (and the law change), ensures that your family can handle things in the event you become incapacitated. Signing a durable power of attorney that designates someone to handle your financial affairs will save time, money, and hassle for your family. Without it, your family will have to go to Court to have a guardian or conservator appointed to manage your financial affairs – potentially costing tens of thousands of dollars. This whole Court process can easily be avoided with one simple document and a trusted advisor for your family to turn to in a time of need.

6. Create an Advance Health Care Directive. This document designates a decision maker of your choosing to make sure your wishes are followed when it comes to the medical care you want – or do not want – to receive when you are incapacitated or near death. You will also need to sign a HIPAA release form so your medical records can be released to your health care agent and medical professionals can discuss your medical care with that person.

7. Organize your paperwork and digital files. Since many of us live our lives online these days, make sure your executor has access to all your digital information, including website addresses and the log-in information for those sites. Hot Tip: If you don’t have one already, create a master list of all your online accounts with their associated passwords. We can work with you to include the location of the list in your power of attorney and/or Will or Trust Document so that your executor will be able to find it when the time comes. Put all your important paperwork – deeds, insurance policies, bank and brokerage statements, etc. – in one file and let your executor know where it is.

Bonus tip: If you have minor children at home (or adult children with special needs), don’t rely on naming guardians in your Will alone. Create a comprehensive Kids Protection Plan to ensure your children’s care is covered not just for the long-term, but for the immediate term as well, and that the individuals whom you would NEVER want raising your kids are confidentially excluded so that they never have a chance to take control.

At the very least, everyone over 18 needs to have a Will, Power of Attorney, AHCD, and HIPAA authorization in place. Even if you don’t have a lot of assets – these documents are CRUCIALLY IMPORTANT. The world is a crazy place and having these basic documents in place will protect your intentions and keep your family out of court, should something happen to you.

If you need to design a plan that fits the needs of you and your family, visit Michael’s complete Legal Bistro Profile.


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