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The 6 Steps of Estate Planning

The 6 Steps of Estate Planning

| June 16, 2021
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Estate planning can often be a neglected part of financial planning, because it can be uncomfortable or difficult to think about dying or becoming incapacitated. However, it is important to consider who will handle your responsibilities and receive your assets, and it is even more to design your legacy in a way that reduces the tax burden on and protects your loved ones.

 

Here’s where to start:

  1. Inventory your assets. This may include tangible assets like your home, car, antiques, or collectibles, and it may include intangible assets such as your checking account, investment portfolio, retirement plans, and insurance policies. In addition to inventorying these items, it’s also a good idea to estimate their current value.
  2. Assess your needs. Do you have enough life insurance? Have you named a guardian in your will? Look beyond your assets to determine what your family would need if you aren’t there to provide it.
  3. Establish legal directives. Depending on your needs or wishes, an attorney may suggest a trust, living will, limited or durable financial power of attorney, or other legal documents to honor what you want.
  4. Set up or review your beneficiaries. Retirement accounts and insurance policies typically allow you to designate beneficiaries of your assets. Verify that you have designated the appropriate beneficiaries for all of your accounts or that what you previously designated is still accurate. It’s also a good idea to add contingent beneficiaries in the event your primary beneficiary predeceases you.
  5. Learn your state’s tax laws. While up to $11.7 million of an estate is exempt from federal taxation as of this year, some states have estate taxes with lower thresholds, as well as inheritance taxes. Unfortunately, Washington has the highest estate tax top rates in the nation, with estate taxes of 10-20% on estates above $2.2 million.
  6. Plan for changes. Just as life changes, so should your estate plan. If your circumstances change, such as getting marriage or divorced, birthing or adopting a child, or losing or getting a job, it may be a good time to revisit your estate plan. Even if your circumstances don’t change, you should probably review your plan periodically in case the laws have changed.

 

While it can be a hard topic to think about, establishing and maintaining an estate plan are critical to protecting your legacy long after you are gone. If you have any questions about this or other tax and investment related topics, please let us know. We’d love to hear from you.

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