Learn and Plan | 7 items that should be on your estate planning list
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7 items that should be on your estate planning list

Jun 16, 2021, 9:32:10 PM | Reading Time: 4 minutes

Estate planning is an important process for designating who will receive your assets when you pass away. But it’s also about making certain your family members and other beneficiaries have access to your assets. To ensure your beneficiaries can cost-effectively receive your money and possessions, you should create a checklist of tasks to complete. They include:

  • Asset Inventory
  • Wills and Trusts
  • Power of Attorney
  • Beneficiary Designations
  • Letter of Intent
  • Guardianship Designations
  • Financial Professionals

1. Asset inventory

Your estate plan starts with a catalog of what you own. First, make a list of tangible possessions. These typically include:

  • Housing—house, condo, land, or other properties
  • Vehicles—cars, motorcycles, boats, aircraft
  • Collectibles—comic books, trading cards, rare coins, art, etc.

You also need to make a list of your intangible assets, which often include:

  • Checking and savings accounts
  • Certificates of deposit
  • Stocks, bonds, and mutual funds
  • Life insurance policies
  • Retirement accounts—401(k) plans, individual retirement accounts
  • Health savings accounts
  • Proof of Business Ownership

Once you’ve created your inventory you’ll need to estimate the value of each item, using appraisals, financial account statements, and other sources. 

2. Wills and trusts

Having a will ensures your money and property are distributed to beneficiaries according to your wishes. Make sure the wording in your will is consistent with the way you’ve allocated assets in other documentation, such as insurance policies or retirement accounts, to prevent it from being contested. Without a will, your estate will be left in the hands of state officials. You can have a lawyer draft a will or you can prepare a valid one yourself, but you should have the document witnessed by two adults to prevent challenges to it. Any person may act as a witness to your will, but you should choose people who are not beneficiaries and have no stake in your choices. In some states, a will must also be notarized. Be sure to do a little research to find out what the rules are for your state.

A trust allows you to designate portions of your estate to a trustee while you’re alive. Unlike wills, most trusts cover a specific asset, such as a piece of property, rather than your entire estate. A trust is often set aside for underage beneficiaries who can only claim it when they are old enough to manage assets.

3. Power of attorney

A power of attorney designates someone to manage your financial affairs if you’re medically unable to do so. Your designated agent can act on your behalf in legal and financial situations when you can’t. This includes accessing and managing your assets, as well as paying your bills and taxes. Without a power of attorney, a court may decide what happens to your estate if you are found incapable of managing it.

4. Beneficiary designations

Naming your beneficiaries is vitally important because it often supersedes what’s in a will. People tend to forget who they’ve named on policies and accounts, or they don’t realize they have to name beneficiaries. How many times have we heard the story of an ex-wife getting a payout because she’s still a beneficiary on her ex-husband’s life insurance policy? Don’t let your money and assets go to the wrong person. Make sure your beneficiary section is always filled out and that you name backup beneficiaries in case your primary beneficiary dies before you. 

Like wills, trusts, and power of attorney, if you don’t name a beneficiary, or the beneficiary is underage or dead, a court will likely decide what happens to your estate. Be sure to check your retirement and insurance accounts and update them if anything happens to the beneficiaries named.

5. Letter of intent

A letter of intent is a document of instructions for your executor or beneficiary. Letters of intent can provide funeral details, special requests, or directions for a particular asset after you die. This document is not considered a valid legal document, but it does help a judge understand your intentions, which will aid in the distribution of your assets.

6. Guardianship designations

A will or trust may include a guardianship clause, but if yours does not, you need to make sure you’ve selected a person to take care of your children should you pass away. Consider a guardian who has similar views to your own, has the finances to take care of your kids, and is willing to raise them. A backup guardian should also be named. Be sure to document how you want your children raised and cared for. Without a guardian designation, a court may rule that your children be taken in by someone you would not approve of. They could also make them wards of the state, which means they’d go into the foster care system.

7. Financial professional

To ensure your estate plan is in good shape, it’s a good idea to talk to a financial professional, attorney, and/or estate tax professional who can help make sure you’re on the right path, help you navigate state regulations and inheritance taxes, and even work with you to create a sound estate plan.