Estate Planning Checklist – 7 Simple Steps to the Perfect Estate Plan
Planning your estate for your loved ones involves a lot of time and effort. You have to consider a variety of factors like your total assets, potential legal challenges, and tax laws in your home state. This article is going to serve as an estate planning checklist that will cover the process in seven steps.
1: Determine Your Net Worth
The first item on our estate planning checklist is determining your net worth. Net worth is the sum of your assets that exceed your liabilities. To calculate your net worth, begin by adding up all of your assets. Be sure to include things like your savings, cash on hand, money owed, the current value of investments like stocks and bonds, and property holdings.
You can use the last appraised value or a site like Zillow to get an approximate estimate of your property value. Once you have tallied your assets, go ahead and add up all of your liabilities. This should include all of your credit card debt, student loans, remaining mortgage balance, and other debts. The difference between the two should be your net worth.
In the event that you find yourself with a negative net worth, consider working to pay off debt as quickly as possible. A negative net worth can prove to be disastrous and will potentially ruin any further estate planning steps you take in the future. If necessary, consult with a licensed credit counselor to improve your financial situation and establish a responsible budget.
2: Understand Probate and Plan for It
Now that you have an idea what your net worth is, the next step on our estate planning checklist is to understand the concept of probate. One of the costliest things associated with inheritance is the probate. This process involves a court working to uncover all of the available assets a recently deceased person may have had and paid off all of the relevant creditors that have valid claims.
Once valid debts have been settled, the remaining assets are distributed to family members and other individuals based on state law and the instructions that may have been included in the will. Probate is particularly problematic for larger inheritances where assets are distributed across multiple states.
This is why many individuals seek to make sure that their wishes are carried out according to very specific instructions via wills or trusts.
3: Seek Out a Qualified Estate Planning Attorney
The next step in our estate planning checklist is to seek out the help of a qualified estate planning attorney. Access to a qualified attorney ensures that you will receive all of the educational and legal resources you need to create an appropriate estate plan.
When looking for an estate attorney, consider asking your friends for potential recommendations. An attorney that has already worked with your friends in the past and has established a positive relationship is a much safer bet than the one you discovered in the phone book.
One pitfall to avoid is using a friend or family member who has the license to practice law as your attorney for estate planning. An estate planning attorney should always be professional and completely neutral. This helps guarantee that everyone will follow your directions without outside interference.
When you have found a potential match, check your local business directory to ensure their accreditations are still valid and ask for potential references. Most state websites also list any complaints that have been made against legal professionals in the past as well.
4: Create an Advanced Healthcare Directive
The next step in our estate planning checklist is to create an advanced healthcare directive. For those who do not know, these directives have the purpose of providing clear instructions to your friends and family during certain medical events that may happen to you.
Prime examples include not resuscitating orders and instructions regarding artificial life support like feeding tubes. One form of health care directive you may want to consider is known as a health care proxy.
These documents typically contain instructions for a wide variety of situations. Also, people often refer to them as a medical power of attorney. Make sure that you have a trusted friend or family member in mind to name in your document instructions with a potential backup option as well.
5: Don’t Forget About Potential Mental Incapacitation
The next item we are going to cover in our estate planning checklist is proper mental incapacitation preparation. Many healthcare directives forget to cover what happens in the event you become mentally incapacitated. If this occurs, the state often takes control of your estate by forming a court-supervised guardianship.
To avoid this, make sure you include specific instructions relating to your ongoing care while you are mentally incapacitated. Once you draw up those instructions, you need to make sure that you name a person as your approved guardian to handle your financial affairs and further manage your estate.
6: Consider a Living Trust
A living trust offers many potential advantages over traditional wills. One of their biggest advantages is that they help reduce or eliminate lengthy probate proceedings. Potential recipients might often challenge wills after death has occurred.
With a living trust, you can specifically name who you want to be excluded from your asset distributions. This helps avoid the issue altogether reduces the likelihood of your assets being distributed promptly.
You can also help create an ongoing revenue stream for your family and their descendants with proper planning. Many estate planning lawyers can help set up ongoing payment models. Furthermore, they can recommend investment companies that can help manage your assets after your death.
7: Remember Your Will
While a living trust is very useful, it does not mean it will replace your will. Wills are extremely important for parents with minor children since a living trust cannot name guardianship. Wills also function as a backup for assets that you may have recently acquired. Moreover, you might not have added them to your living trust before your death.
In conclusion, we recommend you to use the seven steps outlined in our estate planning checklist. Then, you should be well on your way to planning your affairs. Remember to consult with your lawyer and financial advisor frequently. This way, you can be positive that you are making the best decisions for you and your family.