Photo Credit: Ridofranz
What legacy or impact do you want to make?
Beyond retirement, estate planning is one of the most important (and complicated) financial decisions a person can make. It can be emotional and overwhelming to contemplate mortality, but life is anything but certain. If someone dies without an estate plan, their assets could be given to the wrong people or consumed by taxes. Having an estate plan is essential for ensuring your assets are protected in life and death.
Here are 7 Critical Tips for Estate Planning:
1. Define your objectives.
Estate planning has a straightforward yet daunting goal: to record a plan for distributing your life’s assets upon your death.
Define your objectives early. What’s your ultimate goal? To reduce strife between relatives after your passing, to minimize taxes, to support your favorite charities?
Start with your intentions, and your next steps will be clearer.
2. Inventory your belongings.
Take stock of what you have.
Your assets include both the tangible and intangible, such as:
- Homes, land and real estate
- Cars/boats
- Collectibles/antiques
- Sentimental family heirlooms
- Practical possessions (clothing, books, tools etc.)
- Bank accounts
- Investments
- Life insurance policies
3. Consider your values.
After you’ve taken stock of what you have, take stock of what you want to leave behind. What legacy, memory, or impact do you want to make?
Perhaps, as a first-generation degree holder, you have a high value for college education. Or, perhaps, you want nothing more than to enable the generations that follow you to have enough for down payments on their homes. What do you value?
4. Brainstorm your beneficiaries.
In most states, next-of-kin are the standard estate beneficiaries when a will doesn’t exist. But such a standard may not align with your wishes.
Make a list of the people you’d want to receive a piece of your estate, then consider the legacy you wish to leave with them, both practical and meaningful.
5. Prepare your inheritors' tool chest.
Tax implications hold significant power over the final value of inherited funds, while medical coverage, life insurance policies, and other financial tools can be the difference between using up your resources in your final days versus retaining a nestegg to pass along.
Among the list of medical and legal considerations you should evaluate with a professional are the following:
- Life insurance
- Trust
- Power of attorney
- Medical Care Directive
- Tax implications
6. Enlist the advice of a pro.
If the above duties sound daunting, they can be. This is where a financial advisor can help. A licensed fiduciary is legally obligated to act in your best interest, and can help navigate the ins and outs of estate taxes, life insurance, wills and trusts, and more. Getting the right advice at the right time could save your beneficiaries significant tax liability, and make the process less stressful.
7. Don't "set it and forget it."
A quality estate plan should always be updated. Beneficiaries’ needs change, as do tax laws. A will is a plan to reevaluate regularly.
The complexity of considering money, mortality, and family dynamics can be overwhelming. Instead of facing it on your own, meet with a financial advisor who can help you assess what you have and how best to transfer your assets in the most tax efficient way. SmartAsset developed a free tool to match you with up to 3 vetted financial advisors serving your area who are rigorously screened through a proprietary due diligence process. Start building your legacy today with these 7 critical steps for estate planning.
Try SmartAsset’s free tool to get started
This is not an offer to buy or sell any security or interest. All investing involves risk, including loss of principal. Working with an adviser may come with potential downsides such as payment of fees (which will reduce returns). There are no guarantees that working with an adviser will yield positive returns. The existence of a fiduciary duty does not prevent the rise of potential conflicts of interest.
SmartAsset.com is not intended to provide legal advice, tax advice or financial advice (Other than referrals to Investment Advisers or Investment Adviser Representatives). SmartAsset is not a financial planner, broker or tax adviser. The Service is intended only to assist you in your understanding of financial organization and decision-making and is broad in scope. Your personal financial situation is unique, and any information and investing strategies obtained through SmartAsset.com may not be appropriate for your situation. Accordingly, before making any final decisions or implementing any financial strategy, you should consider obtaining additional information and advice from your accountant or other financial advisers who is fully aware of your individual circ*mstances.
SmartAsset Advisors, LLC (“SmartAsset”), a wholly owned subsidiary of Financial Insight Technology, is registered with the U.S. Securities and Exchange Commission as an investment adviser. SmartAsset’s services are limited to referring users to third party registered investment advisers and/or investment adviser representatives (“RIA/IARs”) that have elected to participate in our matching platform based on information gathered from users through our online questionnaire. SmartAsset does not review the ongoing performance of any RIA/IAR, participate in the management of any user’s account by an RIA/IAR or provide advice regarding specific investments.
We do not manage client funds or hold custody of assets, we help users connect with relevant financial advisors.
