Estate Planning: What To Do Before You Die
Estate planning might sound like it is only necessary for the wealthy. However, that isn’t true, and even the wealthy sometimes fail to plan for the future. Celebrities such as Aretha Franklin and Prince famously died without proper estate plans or even a will in place.
With that in mind, we wanted to provide a list of things you should do before you pass away. As we have discussed before, estate planning goes well beyond drafting a will. To learn the differences between a will and an estate plan, read our blog on the subject.
1. Itemize Your Belongings For Your Estate Plan
Go through the inside and outside of your home, and create a list of all valuable items. Some items you’ll definitely want to include are the house itself, expensive jewelry, heirlooms, televisions & other expensive electronics, vehicles, or collectible items.
You may be surprised at how long the list is. One of the major misconceptions when it comes to estate planning is that you don’t own enough valuable items to need an estate plan or will. While making the list, you may want to note who you would like to leave the item to. For example, you may wish to leave your mother’s wedding ring to your daughter, or a sports car to your son.
2. Create a List of Other Assets
While the items in your home will mostly be physical, there are other assets you may own that are not. These can include 401 (k) or IRAs, bank accounts, life insurance policies, and other policies such as homeowner’s, auto and health insurance.
Be sure to include account numbers and also where the documents are being kept. Your loved ones will be grateful that they do not have to tear the house apart searching for paperwork. It might also be a good idea to list any contact information for the companies that hold these policies, just in case.
3. Estate Plans Should Include a List of Your Debts
Much like assets, debts will also need to be settled upon your death. Gather all documents related to mortgages, auto loans, Home Equity Lines of Credit (HELOCs), and other financial obligations you might owe.
Much like your non-physical assets, you’ll want to list account numbers and the contact information for the institutions involved. Many forget to include their credit cards in this process. Make sure you signal which cards you use frequently on the list, so any debts owed can be paid.
4. Include a List of Memberships in Your Estate Plan
Over the course of your life, you may join specific organizations that can offer death benefits at no cost to your beneficiaries. Groups such as AARP, The American Legion, and some college alumni societies, could have accidental life insurance benefits.
Include any other charitable organizations that you support. It’s also a good idea to let your beneficiaries know which charitable organizations or causes are close to your heart and to which you might like donations to go in your memory.
5. Make Copies of the Lists Above
Once you have completed your lists, you should sign them and make at least three copies. Give the original to the administrator of your estate, and two of the copies to trusted friends or family members. The third copy should be kept by you and put into a safe deposit box. Share the box information with your spouse or someone close to you, such as an adult child or sibling.
6. Make Sure You Review Your Retirement Accounts
Accounts and policies that have designated beneficiaries will pass directly to those people or entities upon your death. It does not matter how you direct that these accounts or policies be distributed in your will or trust. The beneficiary designations associated with the retirement account will take precedence.
Contact your employer’s customer service team or plan administrator for a current listing of your beneficiary selection for each account. Review each of these accounts to make sure the beneficiaries are current and listed exactly as you like. This is especially important if you have divorced and remarried.
7. Update Your Insurance Policies
Much like your retirement accounts, life insurance and annuities can have designated beneficiaries. Be sure to keep these documents up to date. Ensure that the beneficiaries are the correct individuals, and also that their names are spelled correctly. A slight spelling error can lead to mass confusion and potential mistakes.
8. Assign Transfer On Death Designations
Assets bequeathed in a will often go through probate, as do assets if someone dies intestate. This process, in which your assets are distributed per court instruction, can be costly and time-consuming.
However, many accounts, such as bank savings, CD accounts, and individual brokerage accounts can have a TOD designation assigned. This means that when you pass on, your accounts will transfer ownership to the individual(s) you decide. This also prevents the costly, time consuming, and emotionally draining process of probate.
9. Select a Responsible Person as Estate Administrator
Your estate administrator or executor will be in charge of administering your will when you die. It is important that you select an individual who is responsible and in a good mental state to make decisions.
Don’t immediately assume that your spouse is the best choice. Think about how emotions related to your death will affect this person’s decision-making ability. If you foresee an issue, consider other qualified individuals.
10. Draft Your Will for Your Estate Plan
Everyone over age 18 should have a will. It is the rulebook for the distribution of your assets, and it could prevent havoc among your heirs.
A will can also name a guardian for your minor children, and designate who should care for your pets. You can leave assets to charitable organizations through your will, too.
Wills are fairly inexpensive estate-planning documents to compose; many attorneys can help you craft a will for less than $1,000, depending on the complexity of your assets and your geographic location.
Make sure that you sign and date your will, in front of two non-related witnesses who should also sign the document, and have it notarized. Finally, make sure other people know the location of the document so they may access it when needed.
11. Review Your Estate Plan Documents Regularly
Review your will for updates at least once every two years and after any major life-changing events (marriage, divorce, the birth of a child, and so on). Life is constantly changing, and your assets and wishes are likely to change from year to year, too.
12. Copy Your Estate Administrator
Once your will is finalized, signed, witnessed, and notarized, you will want to make sure that your estate administrator gets a copy. If the original is not being kept in your home (for example, it’s at your attorney’s office), you should also keep a copy in a safe place at home.
13. Simplify Your Finances
If you’ve changed jobs over the years, it’s quite likely that you have several different 401(k) retirement plans still open with past employers or maybe even several different IRA accounts. You may want to consider consolidating these accounts into one individual IRA. Consolidating of accounts allows for better investment choices, lower costs, a larger selection of investments, less paperwork, and easier management.
14. Complete Other Important Estate Planning Documents
At a minimum, you should create a will, power of attorney, healthcare proxy, and living will.
Your will should also assign guardianship for your minor children as well as any pets. Consider setting up both financial and medical powers of attorney so that people you trust will be there handling your affairs should something happen to you.
You can also write a letter of instruction to leave step-by-step instructions as well as spell out your personal wishes for things like your funeral or what to do with your digital assets like social media accounts. If you’re married, each spouse should create a separate will, with plans for the surviving spouse. Finally, make sure that all the concerned individuals have copies of these documents.
15. Take Advantage of College Funding Accounts
You may want to set up 529 college savings plans for your grandchildren. In these plans, savings grow tax-free, and many states offer tax deductions for the person contributing the funds.
16. Visit an Estate Planning Attorney
While you may think that you’ve covered all your bases, it may be a good idea to consult with a professional on a full investment and insurance plan. And if it’s been a while, you may want to revisit your plan. As you get older, your needs may change, such as figuring out if you need long-term care insurance and protecting your estate from a large tax bill or lengthy court processes. Professionals will also be up on changes in legislation and income or estate tax laws, which could impact your bequests.
Of course, The Mitten Law Firm is an excellent choice among Downriver estate planning attorneys. You can contact us for a free consultation.
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