For many people, estate planning feels like an overwhelming process. They don’t know what exactly to do or where to start, so they simply procrastinate. Quite a few people who die without estate plans never intended to be irresponsible. They simply let the process get away from them.
Approaching estate planning with a checklist can make it easier for someone to cover all of their basic needs and feel confident about the protection that they derive from the process. What steps does someone need to take to create an effective estate plan?
Establish an inventory of assets
The very first step when creating an estate plan is to look over personal holdings carefully. An exhaustive list of resources makes it easy for someone to properly address their personal holdings in a will.
Explore current and future financial obligations
Personal resources are important, but debts can also have a major impact on an estate plan. Someone’s financial obligations usually pass to their estate after they die. People need to determine how much their estate may need to pay so that they can properly allocate resources to cover their obligations.
Think about potential beneficiaries
The selection of beneficiaries can be a very straightforward process in some cases. Many people try to leave most or all of their property for their spouses, children and grandchildren. Others may want to leave resources for friends or for charitable causes. Identifying beneficiaries can help someone plan how they allocate resources among those parties.
Identify potential risks
Are two beneficiaries prone to disputes with one another? Is the estate large enough to be at risk of taxes? Identifying issues that could lead to a reduction of someone’s estate or litigation can help them integrate important terms into their plan.
Choose the right documents
Many people begin with a will and expand from there. A trust is useful if someone wants to mitigate tax liability or control how beneficiaries use an inheritance. Powers of attorney provide support if someone becomes incapacitated later in life. Advance directives provide guidance regarding medical wishes in an emergency.
Commit to a schedule for reviewing documents
An estate plan is only as useful as it is accurate and legally compliant. Testators generally need to commit to making regular updates to their documents to ensure they have after someone’s death. Many people review their documents three or four times a decade or after major life events, such as a divorce.
Those who complete all of the steps on this basic estate planning checklist can feel more confident that their estate plan should meet their basic needs and allow others to fulfill their last wishes.