Estate Planning: 6 Essential Steps to Help Prepare for the Future

Estate planning can be easy to put off. It requires thinking about decisions many of us would rather not face, and it can be difficult to know where to begin. But having an estate plan in place can help you communicate your wishes, organize your financial affairs and provide important guidance for the people you care about.

And estate planning isn’t only for people with significant wealth.

If you own a home or vehicle, have bank or investment accounts, participate in a retirement plan, carry life insurance or simply have personal belongings that matter to you, you have an estate. Estate planning helps you consider what should happen to those assets and who may be responsible for important decisions if you’re unable to make them yourself.

Whether you’re starting an estate plan for the first time or reviewing one you’ve had for years, these six steps can help you understand some of the important pieces to consider.

What is Estate Planning?

Estate planning is the process of considering how your assets and financial affairs should be handled during your lifetime and after your death. It can also address who you want to make certain financial or healthcare decisions if you’re unable to make them yourself.

Depending on your individual circumstances, an estate plan may involve a will, trusts, beneficiary designations, powers of attorney, healthcare directives and other financial or legal arrangements.

The right approach will be different for everyone. Your family, finances, goals and wishes all play a role in determining what should be included.

Why Does Estate Planning Matter?

An estate plan gives you an opportunity to document your wishes rather than leaving important decisions for others to make later.

It can help identify who should receive certain assets, who you trust with important responsibilities and how you would like certain financial and healthcare matters handled.

Planning ahead can also make it easier to organize information your family or other trusted individuals may eventually need.

1. Understand What Makes Up Your Estate

Before deciding what should happen to your estate, it helps to understand what’s in it.

Start by creating an inventory of your assets, accounts, property and financial obligations. Your list might include:

• Checking and savings accounts
• Retirement accounts
• Investment accounts
• Life insurance policies
• Your home and other real estate
• Vehicles
• Business ownership or interests
• Valuable or meaningful personal property
• Digital accounts and assets
• Mortgages, loans, credit cards, and other debts

Understanding the approximate value of your assets can provide an even clearer picture of your overall estate.

For some assets, determining value may be straightforward. Others, such as a business, real estate, collectibles or jointly owned property, may require additional information or professional assistance.

As you create your inventory, also consider where important financial statements, insurance policies and legal documents are stored. Organization today may make it easier for the people responsible for managing your affairs later.

2. Decide What You Want Your Estate Plan to Accomplish

Estate planning isn’t only about deciding who receives your assets. It’s also about identifying the people you trust to carry out your wishes and make important decisions when necessary.

Start by considering questions such as:

• Who would you like to receive your assets?
• Are there children or other family members who depend on you?
• Are there charities or organizations you’d like to support?
• Who would you trust to carry out the instructions in your will?
• Who would you want handling financial matters if you couldn’t do so?
• Who would you trust to make healthcare decisions on your behalf?
• If you have minor children, whom would you want to care for them?

Choosing an Executor

An executor is generally responsible for carrying out the instructions in a will and helping settle an estate.

Responsibilities may include identifying and valuing assets, addressing debts and taxes, completing required paperwork and distributing property according to the estate documents.

Because the role can require significant time and responsibility, carefully consider whom you choose and discuss the responsibility with that person.

Naming a Guardian

Parents of minor children should also consider whom they would want to serve as guardian if both parents were unable to care for them.

Families caring for a child or other dependent with special needs may have additional financial and legal considerations. Appropriate legal and financial professionals can help families evaluate those needs.

3. Know Which Documents May Be Part of Your Estate Plan

A will may be one of the most familiar estate-planning documents, but it isn’t necessarily the only one.

Depending on your circumstances, your estate plan may include several documents or arrangements that address different needs.

Trusts and powers of attorney can involve complex legal and tax considerations, and laws can vary by state.

An estate-planning attorney can help you determine which documents and strategies are appropriate for your individual circumstances.

4. Review Your Beneficiaries and Account Ownership

Your will isn’t the only factor that may determine how assets are transferred.

Retirement accounts, life insurance policies and certain other financial accounts may allow you to name beneficiaries directly. How accounts or property are owned may also affect how they’re handled.

That’s why it’s important to consider these pieces alongside the rest of your estate strategy instead of treating each account or document separately.

Review your beneficiary designations periodically and after significant changes such as:

• Marriage or divorce
• Birth or adoption
• Death of a beneficiary
• Changes in family relationships
• Retirement
• Significant changes in your financial situation
• A decision to change who should receive certain asset

Keeping beneficiary information current can be an important part of making sure your overall estate strategy continues to reflect your intentions.

5. Talk With Your Family About Your Estate Plan

A well-prepared estate plan can still create confusion if the people involved don’t understand your wishes or the responsibilities you’ve asked them to take on.

Conversations about finances, future care and death can feel uncomfortable. Having those discussions before a health issue or family crisis, however, may provide more time for everyone to listen, ask questions and understand your decisions.

Start the conversation early

Don’t wait for an emergency to begin talking about your wishes.

Choose a time when you and your family can have a thoughtful conversation without the added pressure of a major health or life event.

Be clear about your wishes

Explain what’s important to you and the reasoning behind the decisions you’re comfortable discussing.

Your legacy may include more than the assets you leave behind. Estate planning can also provide an opportunity to talk about financial habits, charitable priorities and other values you hope to pass along.

Explain important roles

If you’ve identified someone as an executor, financial power of attorney, healthcare decision-maker or for another important role, make sure that person knows.

Discuss what you’re asking of them and give them an opportunity to ask questions.

Make important information accessible

Consider which trusted individuals need to know where important documents and information can be found.

Depending on your circumstances, that may include estate-planning documents, account information, insurance policies or other records.

You don’t necessarily need to share every financial detail with every family member. Focus on making sure the appropriate people have the information they may need.

Give people time to process

Estate planning can be an emotional subject.

Listen to questions and concerns, and recognize that you may not cover everything in one conversation. These discussions can continue as your circumstances and estate plan evolve.

6. Review Your Estate Plan as Life Changes

Creating an estate plan isn’t necessarily a one-time task.

Your family, finances, health and priorities can change over time. Periodic reviews can help you determine whether your documents, beneficiaries and financial arrangements still reflect your wishes.

• Marriage or divorce
• Birth or adoption
• Death of a family member or beneficiary
• Moving to another state
• Significant health changes
• Retirement
• Buying or selling a business
• Major financial changes
• Changes in tax laws
• Beneficiary or decision-maker changes

Even without a major life event, periodically revisiting your estate strategy can help you confirm that it continues to reflect your current circumstances and priorities.

Who Can Help with Estate Planning?

Estate planning often involves several professionals, each with a different area of expertise.

• Estate-planning attorney: An attorney can provide legal advice and prepare legal documents appropriate for your individual circumstances.
• Tax professional: A qualified tax professional can help you understand tax considerations specific to your situation.
• Financial professional: A financial professional can help you consider the financial components of your estate strategy, including investments, retirement accounts, insurance, beneficiary designations and other assets, and how those pieces fit within your broader financial goals.

Your financial professional can also work alongside the legal and tax professionals involved in your estate-planning strategy.

How Can You Take the Next Step with Estate Planning?

Estate planning can involve a lot of decisions, but you don’t have to address everything at once. Start by understanding what you own, reviewing the plans and documents you already have, and identifying what may need more attention.

From there, you can work with the appropriate financial, legal and tax professionals to help make sure the different pieces of your estate strategy work together.

A Forward Investment Services financial professional can help you review the financial pieces of your estate strategy and work alongside your legal and tax professionals as you plan for the future.