You've worked hard to build your assets. An estate planning checklist can be helpful for any income level. Learn about 529 plans and other tax-advantaged strategies.
None of us likes to think about dying—and what will happen to our money afterward. However, estate planning is an important part of managing your finances.
One common misconception is that estate planning isn’t necessary if your estate’s assets amount to less than the 2022 federal estate tax exemption of $12.06 million per individual. However, pretty much anyone can benefit from estate planning, which is designed to help protect your assets for your heirs.
Estate planning is the process by which you determine how your assets should be handled when you’re no longer capable of making financial decisions.
“We often think of estate planning as something the ultra wealthy do,” said Dara Luber, senior manager at Schwab. “However, estate planning can be anything from setting up a will or trust to making sure you have the right beneficiaries to creating a health care directive.” While more than 50% of Americans think estate planning is at least “somewhat important,” only 33% of Americans have a will or living trust, according to the 2022 Wills and Estate Planning Study from senior care living referral service company Caring.com.
As for their reason for delay, more than 40% of Americans told the senior living referral service that it’s all about procrastination. But when asked to provide more detail, one in three said they haven’t explored the process because they don’t believe that they have enough assets to pass along to loved ones.
The survey also found that high earners are not always high planners—of those without estate planning documents, 63% who make $80,000 or more per year reported they “just haven’t gotten around” to preparing an estate plan.
“Your estate planning moves today can make a big difference later,” Luber explained. “With the right estate plan in place, you can reduce the chances your heirs will have to deal with probate and reduce the amount of money that ends up in the hands of taxing authorities.”
As you manage the estate planning basics, it can help to have an idea of what to expect. Here’s an estate planning checklist that can help you make the most of your money.
Refer to this handy estate planning checklist to help you make the most of your money.
The first thing many people think about when estate planning is the will. Your will is one way to let people know how you want your assets taken care of after you pass. A will can include what you want done with your various accounts but also how to distribute other property.
On top of that, you’ll want to include information about who should act as guardians for children and pets. And you’ll need to designate a trusted executor to oversee the will.
“While there are digital estate planning options that can help you craft a basic will, you might want to consider an estate planning attorney,” Luber explained. “There are specific state laws, including where your executor lives and other items, that a seasoned estate planning lawyer can help with.”
Review your beneficiaries and make sure they’re up to date.
“Who you have listed on your life insurance policy, retirement account, and in other places matters more than what’s in your will,” Luber noted. “When you have a major change to your life circumstances, go back through your beneficiaries, update your will, and make sure everything matches.”
This includes charities as well as individuals. There are a number of estate planning strategies designed to help you pass your assets on, but none of them matter if you don’t have your beneficiaries properly identified.
Note: If you’re a TD Ameritrade client, managing your beneficiaries is straightforward and can be done online.
Estate planning trusts can be great tools to pass your assets on while potentially helping your heirs avoid the sometimes expensive and drawn-out process of probate. There are many different trust configurations, which can be used to provide a variety of benefits depending on what matters most to you and your situation.
Luber suggested that speaking with a knowledgeable professional is one way to help you set up a trust designed to meet your needs.
Estate planning isn’t just about what happens after you pass, though. It also includes the paperwork involved should you become incapacitated. Preparing the proper documentation for assigning a power of attorney to make decisions on your behalf is important.
“Don’t forget about health care directives and proxies,” Luber mentioned. “Look for someone you trust to handle these decisions and consider using an estate planning attorney to ensure that everything is as it should be.”
While there are online estate planning services and documents, they don’t always hold up in the end, and they might be harder to customize, especially if your situation is complex.
You don’t need to wait until you’re gone to provide resources to your family and heirs.
“Estate planning can also involve giving now while your heirs and others can use the resources,” Luber said. “In fact, it can be more fulfilling to watch your money being used at present.”
In 2022, it’s possible to give up to $16,000 to each recipient without paying the gift tax (which is paid by the giver, not the recipient). If you’re married, each spouse can give $16,000, for a total of $32,000. On top of that, it’s possible to front-load contributions to a 529 plan, so if you have beneficiaries you want to help with college, you can put in up to five years’ worth of gifts (up to $80,000) in the 529 plan.
When you give to charity now, instead of waiting until you pass, you can claim a tax deduction, whether you donate directly, give stock, or set up a donor-advised fund. This allows you to benefit now—along with your beneficiaries.
You’ve worked hard to build your assets and make the most of your money. Estate planning is about helping your legacy live on after you pass. Carefully consider what you want done with your assets and then create a plan designed to increase the chances that everything will be distributed as you wish.
Do Not Sell or Share My Personal Information
Content intended for educational/informational purposes only. Not investment advice, or a recommendation of any security, strategy, or account type.
Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.
An investor should consider a 529 plan’s investment objectives, risks, charges and expenses before investing. A plan’s Program Disclosure Statement, which contains this and more information, should be read carefully before investing. Investors should consider before investing whether their or their beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state’s qualified tuition program and should consult their tax advisor, attorney and/or other advisor regarding their specific legal, investment or tax situation.
This material is provided for general and educational purposes only, and is not intended to provide legal, tax or investment advice, or for use to avoid penalties that may be imposed under U.S. federal tax laws. This material is not an offer to sell or a solicitation of an offer to buy any securities. Any offer to sell units within the Plan may only be made by the Program Disclosure Statement and Participation Agreement relating to the Plan.
TD Ameritrade does not provide tax or legal advice and this information is not intended to be relied upon as such. You should consult with a qualified tax or legal professional with regard to your specific circumstances.
Investments in 529 plans are not guaranteed or insured by the FDIC, SIPC or any other government agency, and are not deposits or other obligations of any depository institution. A donor may elect to treat a contribution to a beneficiary’s account as made ratably over a five-year period. As a result a donor may make a contribution to a beneficiary’s account of up to $75,000 (or up to twice that much if the donor and his or her spouse elect to “split” gifts) without any negative gift tax consequences, so long as the donor does not make any additional contributions to the account (or any other gifts to the account beneficiary) during that tax year or any of the succeeding four calendar years. A Federal Gift Tax Return (Form 709) is required to be filed. Please consult with your tax or legal professional. If the donor dies before the end of the five-year period, the portion of the contribution allocable to years after the donor’s death will be includible in the donor’s estate for Federal estate tax purposes.
Market volatility, volume, and system availability may delay account access and trade executions.
Past performance of a security or strategy does not guarantee future results or success.
Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.
Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.
This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union.
TD Ameritrade, Inc., member FINRA/SIPC, a subsidiary of The Charles Schwab Corporation. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2024 Charles Schwab & Co. Inc. All rights reserved.