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Estate Planning Checklist: Help for End-of-Life Planning

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Estate planning is the process of designating your assets for distribution after you pass away. Making financial decisions about your own death is an unpleasant task, to be sure; however, an estate plan allows you to have the final say when dividing your estate. Without one, your assets are subject to your state's probate laws, and the court will determine what happens to any minor children you leave behind. Worse, legal disputes or other conflicts can arise among your loved ones without an estate plan in place.

What tools should I consider during the estate planning process?

Will: A will is a public statement designating exactly how your assets will be distributed to your loved ones (the beneficiaries of the will) upon your death. You may also choose an executor, who will be responsible for settling your estate and filing any related tax returns due after your passing. In addition to designating beneficiaries, a will provides instructions for wrapping up financial loose ends connected to your estate. This may include paying off creditors and maintaining property before it is inherited or sold. If you pass away while caring for any dependents, you should designate their new guardians in the will.

Trust: A trust is a legal entity that allows a third party to hold and direct property and other assets that you place in the trust. It can be useful when planning an estate, and many of the more elaborate varieties help minimize estate taxes that may be owed after your death. In general, trusts used to minimize estate taxes allow you to designate a third-party fiduciary to hold assets for named beneficiaries, distributing them according to a plan or time horizon. One of the big benefits to a trust, as opposed to a will, is that assets pass seamlessly upon your death and are not subject to probate court. This can make the post-mortem estate settling process much simpler and avoid publicizing family matters you wish to keep private. A key decision for estate planning purposes is to determine whether the trust will be revocable (meaning you can add and remove assets from the trust) or irrevocable (where assets leave your estate permanently).

Power of Attorney: A power of attorney is a legal document that names someone to oversee and make decisions about your health care, your personal finances or a business( if you own one) in the event you become incapacitated. Instead of giving powers of attorney over health care, financial and business matters to one individual, some people split the responsibility between two or more individuals.

Living Will or Advanced Medical Directive: These estate planning tools are written statements that give specific guidance to your doctors, family and friends as to the level of lifesaving medical care you wish to receive. Your state will have language you can use to express your wishes in keeping with local laws and requirements. You should then give a copy to your doctor, your attorney and whoever will have your power of attorney for health care.

Make Sure Your Named Beneficiaries Are Current

Be sure to check whom you have named as your beneficiary for any IRAs, 401(k) plans, bank accounts and insurance policies you own. Often, choices made at the beginning of a career are left unchanged even as people get married, have children and go through other life changes. It's easy to lose track of bank accounts, retirement plans from former jobs and insurance policies purchased along the way. If you don't update your named beneficiaries, those assets will go to the individuals named on the documents you signed long ago, which supersedes any directives in your will.

Don't Forget to Plan Your Funeral

Part of creating a complete estate plan is to think through how and where you want to be buried. Consider whether you want to buy a cemetery plot and prepay burial expenses. If you are a current or former member of the military, you may be entitled to a Veterans burial allowance. No matter what you decide, be sure to share your wishes with the executor of your estate and family members

Who Can Help Build an Estate Plan?

It's possible to craft your own will using online guides at little to no cost. You can also get wording from your state's statutes for a valid living will or power of attorney for health care or financial matters.

However, it's generally a good idea to hire an attorney (and possibly an accountant) familiar with estate law to guide you through the process. This is especially true if you have a large estate with many assets to allocate. Although legal fees range between a few hundred and a few thousand dollars, estate planning professionals can help you structure your estate and end-of-life planning to meet your wishes, take care of your loved ones and minimize any tax burden.

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