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5 Simple Things That Will Make Or Break Your Estate Plan

Estate planning has seen a resurgence since the beginning of the pandemic. Alterations to laws now accommodate virtual updates to wills, trusts, beneficiaries, and other significant estate planning documents, and people seem to have more urgency to get these tasks completed.

Remember, estate planning isn’t just preparing for something you won’t get to see; instead, it is about assembling many moving parts (people, assets, paperwork, etc.) to work for you both now and in the future. 

While estate planning may not be the most popular item on your financial to-do list, it is an important one that sets the tone for the future of your assets. The process and procedures involved can be confusing for many people, which leads us to provide a post that outlines the basic elements of an estate plan: what they are, how they work, and why they impact you.

1. Create (or update) your will

Wills are the hallmark of estate planning. They are often the first thing that comes to mind when drafting a plan for your assets. A will is a legal document that outlines wishes for your estate. It usually includes distributing assets like family heirlooms, property, or cash to relatives or loved ones. 

If you wanted your granddaughter to inherit your rare book collection, for example, you would indicate that in your will. The same is true for other valuables or additional assets. Keep in mind that things like insurance policies, retirement accounts, and some other investments aren’t covered in a will. You must name your beneficiaries separately on those accounts. Should you forget and name different people on the will versus on the policy itself, the beneficiary on the policy would be the one upheld in court.

A will helps catalog your estate while also providing an outline and guidance for handling your assets upon your passing. Should you be caring for a dependent or minor child, you can establish a guardian and trustee, a person who will be legally responsible for the child, in your will. You also will name the executor of your estate and decide who will manage any property.

It is essential to update your will during any significant shift in your family (marriage, divorce, dependent children/grandchildren) or if you add any substantial assets (vacation home, new insurance policy).

2. Name beneficiaries

Beneficiaries are people who inherit something from another person like cash, an account such as an IRA, 401k, or brokerage account, property, and more. You have to name beneficiaries on nearly all of your assets like,

  • Retirement accounts (IRA *traditional or Roth, 401k or another workplace account, pension plan)
  • Insurance policy (health, disability, long-term care, etc.)
  • Investment accounts (transfer on death or TOD)
  • Trust
  • Bank accounts (payable on death or POD)

Once you start looking, there are a lot of places that require a beneficiary designation. Be sure that you update your beneficiaries periodically, especially in the wake of any family transition.

3. Establish a trust

A trust is a wonderful estate planning tool that creates additional privacy and control for your assets. A properly established living trust can be your primary estate planning document while avoiding probate. In a trust, there are three distinct parties: the grantor (the person who creates the trust), the trustee (the person or entity who manages the assets in the trust), and the beneficiary (or the person who receives the assets). 

Trusts provide people with the ability to control when and how their selected beneficiaries receive assets. They are also excellent vehicles to donate to charity consistently. One of the main benefits of trusts is that it can lower estate taxes and avoid probate, a public proceeding of your estate. Trusts offer a medium for people to pass down more wealth to loved ones. 

Keep in mind, establishing a trust is a complex process, and you should consult your estate planning attorney to help.

4. List a power of attorney

A power of attorney is an important role. This legal designation allows someone to make decisions for you should you become incapacitated. Start with a financial power of attorney. This person will handle the financial aspects of your estate, including paying any taxes, outstanding debts, investments, and more. 

Be sure that you choose someone who shares your same philosophy and who will faithfully carry out your wishes.

5. Elect a medical directive

Should you be in the hospital and unable to make decisions on your own, medical directives including a healthcare power of attorney will be there to help carry out your wishes. The person you elect will see that your preferences happen. 

Again, be sure that you choose someone like-minded and trustworthy to ensure that you get the care/treatment you want. While you can have the same person be your financial power of attorney and your healthcare power of attorney, it is best to have two people. These designations can be demanding, making it tough for one person to shoulder. If two like-minded people can work well together, that is your best bet. 

Why estate planning is essential

Estate planning helps you create a clear strategy for your assets. Proper estate planning can bring peace of mind both for you and your family members and enables you to create your legacy. While it might be a difficult topic to broach, bringing clarity, safety, and privacy to your financial life will only make it better. 

Our team at Goepper Burkhardt LLC is passionate about helping people craft estate plans that best meet their needs. In concert with other professionals, we want to help you make your estate plan reflective of your goals and dreams for the future. Give us a call today.

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