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Where to start when it comes to Estate Planning:

What is estate planning?

Estate planning is the process of designating who will receive your assets in the event of your death or incapacitation. Often done with guidance from an attorney, one goal is to ensure heirs and beneficiaries receive assets in a way that manages and minimizes estate taxes, gift taxes and other tax impacts.

7 steps to basic estate planning:

1. Inventory your things

The tangible assets in an estate may include:

  • Homes, land or other real estate
  • Vehicles including cars, motorcycles or boats
  • Collectibles such as coins, art, antiques or trading cards
  • Other personal possessions

The intangible assets in an estate may include:

  • Checking and savings accounts and certificates of deposit
  • Stocks, bonds and mutual funds
  • Life insurance policies
  • Retirement plans such as workplace 401(k) plans and individual retirement accounts
  • Health savings accounts
  • Ownership in a business

Once you inventory your tangible and intangible assets, you need to estimate their value. For some assets, outside valuations like these can help:

  • Recent appraisals of your home, land or other real estate
  • Statements from your financial accounts

When you don’t have an outside valuation, value the items based on how you expect your heirs will value them. This can help ensure your possessions are distributed equitably among the people you love.

2. Account for your family's needs

Once you have an idea of what’s in your estate, think about how to protect the assets and your family after you're gone.

  • Ensure you have enough life insurance — How much life insurance do you need? It depends on factors such as if you're married and whether your current lifestyle requires dual incomes. Life insurance may be even more important if you have a child with special needs or college tuition bills.
  • Name a guardian and contingent guardian for your children when you write your will — This can help sidestep costly family court fights that could drain your estate's assets.
  • Document your wishes for your children’s care — Don't presume that certain family members will share your child-rearing ideas and goals or that a judge will abide by your wishes if the issue goes to court.

3. Establish your directives

A complete estate plan includes important legal directives.

  • A trust might be appropriate. With a revocable living trust, you can designate portions of your estate to go toward certain things while you're alive. If you become ill or incapacitated, your selected trustee can take over. Upon your death, the trust assets transfer to your designated beneficiaries, bypassing probate, which is the court process that may otherwise distribute your property. There's also the option to set up an irrevocable trust, which can't be changed or revoked by the grantor.
  • A medical care directive, also known as a living will, spells out your wishes for medical care if you become unable to make those decisions yourself. You can also give a trusted person medical power of attorney for your health care, giving that person the authority to make decisions if you can't. These two documents are sometimes combined into one, known as an advance health care directive.
  • A durable financial power of attorney allows someone else to manage your financial affairs if you're medically unable to do so. Your designated agent, as directed in the document, can act on your behalf in legal and financial situations when you can't. This includes paying your bills and taxes, as well as accessing and managing your assets.
  • A limited power of attorney can be useful if the idea of turning over everything to someone else concerns you. This legal document does just what its name says: It imposes limits on the powers of your named representative. 
  • Be careful about who you give power of attorney. You might want to assign the medical and financial representation to different people, as well as a backup for each in case your primary choice is unavailable when needed.

4. Review your beneficiaries

Your will and other documents may spell out your wishes, but may not be all-inclusive.

  • Check your retirement and insurance accounts. Retirement plans and insurance products usually have beneficiary designations that you need to keep track of and update as needed. Those beneficiary designations can outweigh what's in a will.
  • Make sure your things go to your chosen people. Sometimes people forget the beneficiaries they named on policies or accounts established many years ago. 
  • Don't leave any beneficiary sections blank. In that case, when an account goes through probate, it may be distributed based on the state's rules for who gets the property.
  • Name contingent beneficiaries. These backup beneficiaries are critical if your primary beneficiary dies before you do and you forget to update the primary beneficiary designation.

5. Note your state's estate tax laws

Estate planning is often a way to minimize estate and inheritance taxes. But most people won't pay those taxes.

  • At the federal level, only very large estates are subject to estate taxes. For 2021, up to $11.07 million of an estate is exempt from federal taxation. In 2022, up to $12.06 million is exempt. If you have a larger estate, you may want to consider a grantor retained annuity trust, or GRAT, a type of irrevocable trust that can help reduce the amount of taxes your heirs pay.
  • Some states have estate taxes. They may levy estate tax on estates valued below the federal government’s exemption amount. Check the state you live in or own assets in.
  • Some states have inheritance taxes. This means that the people who inherit your money may need to taxes on it. 

6. Weigh the value of professional help

Whether you should hire an attorney or estate tax professional to help create your estate plan generally depends on your situation.

  • If your estate is small and your wishes are simple, an online or packaged will-writing program may be sufficient for your needs. These programs typically account for IRS and state-specific requirements and walk you through writing a will using an interview process about your life, finances and bequests. You can even update your homemade will as necessary.
  • If you have doubts about the process, it might be worthwhile to consult an estate attorney and possibly a tax advisor. They can help you determine if you're on the proper estate planning path, especially if you live in a state with its own estate or inheritance taxes.  For your financial and insurance accounts and policies, reach out to your financial professional.
  • For large and complex estate — think special child care concerns, business issues or nonfamilial heirs — an estate attorney and/or tax professional can help maneuver the sometimes-complicated implications.

7. Plan to reassess

Life changes. So should your estate plan.

  • Revisit your estate plan when you have any life or asset changes. This may include a marriage or divorce, birth of a child, loss of a loved one, getting a new job or leaving employment, buying or selling your house or other real estate.
  • Revisit your estate plan periodically even if your circumstances don’t change. Although your situation may be the same, laws may have changed.
  • It will take some effort to revise your plan, but the need to revise means you’ve avoided the biggest estate planning mistake; never drafting a plan at all!


Maxwell Forsman Investment Services Inc. and LPL Financial does not provide legal or tax advice.  Please consult your legal or tax advisor regarding your specific situation.

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