A well-designed estate plan is the best way to protect your assets for your beneficiaries, while keeping predatory creditors or issues due to divorce/remarriage at bay.

Have you been thinking about creating an estate plan, but aren’t sure what it would include, or where to start? Here’s an overview of some things you should consider and what a good estate plan would look like.

Start with your net worth 

The best place to begin your estate plan is to determine your net worth. Start by adding up a rough estimate of the values of your assets, such as your bank, retirement plan and investment accounts. Be sure to include any real estate, cars, boats, jewelry, collectibles, and benefits from your life insurance. Don’t forget to include any money or business interests you’re owed.

Once you’ve calculated your assets, subtract your liabilities. This includes credit card debt, personal loans, car loans, and mortgages. The remaining amount is your net worth.

Key components of an estate plan

In addition to determining your net worth, you’ll also want to make decisions regarding the following key components:

  • A will, which should list who you’d like to inherit your property. If you have children, you should also name a guardian to care for them in the event that something happens to you and the other parent.
  • A living trust holds your property, which will allow your beneficiaries to skip the time-consuming and expensive process of probate court.
  • A living will and a power of attorney (also known as an advance health care directive) establish your health care wishes in the event that you’re unable to make medical decisions for yourself.
  • A financial power of attorney, which gives someone you trust the authority to manage your finances and property if you’re incapacitated and otherwise unable to manage them yourself.
  • A named adult to manage inherited finances and property on behalf of your minor children.
  • Beneficiary forms that name beneficiaries for bank accounts and retirement plans, which will allow these accounts to have an automatic payout in the event of your death. Nearly all states allow you to register stocks, bonds, and brokerage accounts to transfer to your beneficiaries as well.
  • End-of-life wishes, which cover how you’d like to donate your body or organs, or dispose of your body, such as burial or cremation.

If you have a business, you should also create a succession plan, which may include a buyout agreement.

Another thing to consider is where to keep the documents for your estate plan. It’s best to give your executor and attorney access to the documents, so they have them on hand. Make sure to include information about bank accounts, mutual funds, safe deposit boxes, real estate deeds, certificates for stocks, bonds, annuities, retirement plans, 401(k) accounts, and IRAs. This will make it easier for your beneficiaries to be able to find the relevant documents.

Where do real estate taxes fit into your estate plan? Fortunately, as many as 99.7% of estates don’t end up owing federal estate taxes. These taxes are only applicable if your taxable estate is worth more than $11.4 million. Married couples can also transfer up to twice the exempt amount tax-free. However, you may have to consider state estate and inheritance taxes, which may have different floors.

This overview is just skimming the surface of the complexity of estate planning, but it hopefully has given you a better idea of what a good estate plan should entail. Many of our tax specialists offer expertise in estate tax planning, and can project tax liability under different scenarios, as well as explain the various estate planning tools you need to create the right plan for you and your loved ones.

Reach out to us!

Let us know how we can help.

Diamond People