While every estate is different, it's helpful to have a step-by-step guide to take you through what can often be a confusing planning process. Following a guide can help ensure you do things in the right order and don't forget any important parts.
Don't let procrastination be an enemy. If you haven't already created an estate plan, consider starting now. If you have an estate plan but it's been a while since you last looked at it, remember that a lot can change over the years, both in your own life circumstances and due to evolving laws and regulations. Put aside a few hours and start working through the process to determine what’s most important to you as you make your estate plan. Use these 5 tips from Amy Motylewski, senior specialist of retirement and 529 products for TD Ameritrade, to help walk you through the estate planning process.
If you have questions along the way, mark them down and consider reaching out to an attorney or tax advisor who can offer more help.
5 Estate Planning Tips to Consider
#1. Take stock of everything you own, no matter how small.
If an item is important to you and you want to ensure it’s passed down correctly, include it in your list and indicate which recipients should get which assets. Some of these items may include:
- Property. This could include your main residence, along with any vacation homes or rental properties you own.
- Assets. Gather statements for your investment accounts, bank accounts, retirement accounts, annuities, and insurance policies. For parents, this could also include college 529 plans.
- Other. If you have any items of particular value—collectibles, vehicles, jewelry, or any other physical assets you want to specifically pass down, for instance—be sure to include these items in your inventory list.
#2. Consult with an attorney and/or tax advisor.
An attorney or tax advisor can help you create essential estate planning documents to ensure the items you included in your inventory are passed down as you wish. Some documents that will help you do this include:
- Will. This is a document that describes how you want your assets distributed and how any dependents should be cared for in the event of your death. The strongest will is one that’s in writing and signed by you and a witness.
- Trust. Creating a trust allows you to designate someone—the trustee—to hold assets for your beneficiaries or charities. You can dictate exactly how and when the trustee can release the assets. This may sound very similar to a will; however, a trust will usually skip over the probate process, which could allow your beneficiaries and/or charities to receive their assets more quickly. The assets usually aren’t taxed like they would be if they were dispersed via your will through the probate process, but it’s best to check with a tax professional before setting up a trust. There are many different kinds of trusts, so choosing the right one is very important. Trusts are often created by specialized attorneys familiar with estate planning.
#3. Consider creating a living will.
If you’re concerned with your health and worried you won’t be able to make your own health care decisions, you may want to consult a lawyer and create a living will/advanced health care directive.
- This document informs your doctors of your medical wishes so they may act according to your desires if you become incapacitated and can’t make decisions on your own. You could also choose to name a healthcare proxy; see below for more on this role.
#4. Choose the people you want to help carry out your estate plan.
You may need to select a few key people to act on your behalf:
- Executor. The executor of your will is responsible for ensuring that all of your terms are carried out, and oversees the settlement process. You may name more than one executor and have several co-executors. An executor may need to have some financial acumen because they will be overseeing the financial aspects of your will, such as distributing wealth to your beneficiaries/charities and making sure taxes are paid correctly. Maybe you’d like to name a close relative as executor, but they don’t necessarily have the financial knowledge to carry out some of the required tasks. In this instance, you could name a professional or company as co-executor to assist your executor with these tasks.
- Guardian(s) for your dependent(s). If you have dependents, including children or adults who require assistance caring for themselves, you should name a guardian who will care for these dependents. It’s standard practice to name the guardian(s) in your will. There is no rule for who can be named the guardian; it could be a family member or a close friend. It’s important to keep in mind that if you leave money to a minor, the guardian may also have to manage the inheritance until the child reaches the age of majority in your state.
- Trustee. This is the individual you choose to control a trust you set up. The trustee is in control of managing your trust and making disbursements at the appropriate times. The trustee can be an individual, or you could choose a firm to manage your trust.
- Healthcare proxy. This is someone who can make medical choices on your behalf if you’re unable to do so. State laws dictate this person’s authority, so details may change from state to state.
#5. Update your plan regularly or as needed.
After you’ve created your estate plan, you need to keep it up-to-date as your wishes or laws change. Some things to always keep updated include:
- Changes due to laws and regulations
- Any changes to your choices for your executor, trustee, or guardian
- Any changes to the beneficiaries listed in your plan
- Any new assets to include in your plan
As you think through the guide and take action, remember that your age is an important consideration. Although younger people may be less likely to put estate planning front and center, it can be important to get a head start.
“It depends on a person’s situation,” says Amy Motylewski. “If you’re younger but own a residence, you may want to make sure it’s handled properly. And if you have children, it’s even more important because you want to make sure those dependents are cared for properly.”
Although most people require help from professionals to set up an estate plan, many of the forms and documents are available online and can be completed without assistance. To help guide you as you set up your estate plan, refer to the Quick Start Guide to Estate Planning checklist.
Estate Planning Basics and More
Our Financial Consultants can get your estate plans on track. Try our tutorial on the topic: it covers trusts, probate, and more.