An Estate Planning Checklist
Updated: Dec 21, 2019
As a “family financial doctor”, one of the “vital signs” I always check when a prospective client comes to see me for the first time is the level of estate planning they have done. In my experience, fewer than half of the people I see have done all they need to do in this area.
This article will cover the various tools for estate planning, ending with an estate planning checklist.
Please note that this is an informational article only: for advice on your specific situation, see an experienced estate attorney.
If you want to have control over where your assets go at your death, a will is a good idea. A will simply specifies who gets what. If you don’t have a will, your estate will pass by “intestate succession” to your nearest relatives according to the laws in your state of your residence.
If you want to have control over where your assets go at your death, a will is a good idea. A will simply specifies who gets what. If you don’t have a will, your estate will pass by “intestate succession” to your nearest relatives according to the laws in your state of your residence. This means that someone you don’t want your money to go to may get a piece. Also, a will gives you the ability to say who gets grandma’s china, thereby preventing a family squabble.
Married couples typically have their assets in joint ownership, effectively leaving all of their share to their spouse. Retirement accounts pass to whomever is named as the beneficiary, usually the spouse. So if you’re married these assets will not go through probate or be subject to your will. However, attorneys recommend that couples have wills, especially because once the first spouse dies the survivor will want to have one.
Sometimes people want to avoid probate, so they do a living trust. In this arrangement, assets are renamed into the name of the trust. At the second death, a “trustee” administers the distribution of the assets according to the terms of the trust. This can save on probate attorney’s fees and make the settlement process quicker. However, living trusts are more expensive to set up than simple wills.
More Complex Trusts
If you have a large estate (currently over $10,900,000)*, you may be subject to federal estate taxes at the second death. Even if you don’t have this much money, some states also impose their own estate taxes. (In Oregon, estates over $1 Million are subject to estate tax at the second death.) There are various ways to minimize or avoid estate taxes. Ask an attorney about this if you think it might apply to you.
Financial Power Of Attorney
Not everything you do for estate planning relates to your death. What if you become incapacitated, whether it be from an illness or dementia? Who would handle your financial affairs for you? If you’re married, you would typically want your spouse to do this. But unless you have given them power of attorney prior to your incapacitation, they may have to get appointed by a court to get a power of attorney to, say, make a withdrawal from your IRA.
Health Care Power Of Attorney
The same applies to health care decisions. Who do you want to decide what medical treatments you will get if you can’t do this yourself? Since you may not necessarily want the same person to act as your agent for health care as for finances, the health care power of attorney is a separate document. (Note: in the state of Oregon, the health care power of attorney is included in the advance directive.)
According to the state of Oregon: “An advance directive states the health care measures a person wants if he or she cannot indicate to continue curative or life-sustaining treatment. An advance directive can also indicate if the person wants to remove life support systems.” (Source: https://healthcare.oregon.gov/shiba/topics/Pages/advance-directives.aspx)
Note that an advance directive differs from a health care power of attorney in that it applies to terminal illness and whether or not you would want to be kept on life support. The point here is to make a decision about what you’d want so your wishes get respected and others don’t have to make this very difficult decision for you.
I noted above that retirement accounts pass outside of probate. This means that your IRA will pass to whomever you named as a beneficiary, even if it’s a former spouse. So, it’s important to periodically check and update your beneficiary designations on all retirement accounts. The same applies to life insurance policies.
Estate Planning Checklist
Now we’re ready for the checklist:
___ Will, Living Trust or complex trust ___ Financial Power of Attorney ___ Health Care Power of Attorney ___ Advance Directive ___ Beneficiary Check (all retirement accounts and life insurance policies)
This covers five basic steps everyone should take for estate planning.
In addition, if you have minor children or a business you may want to consider additional steps to protect them.
Finally, if you want be ultra-prepared, you will want to make known your wishes for organ donation, disposition of your body (burial or cremation), and you will have your documents well organized.
*Note: The new Trump tax bill raises this to $22,400,000 for 2018.