Estate Planning Checklist: 10 Steps to Making an Estate Plan

Summary:

At a minimum, your estate planning checklist should include a will, advance health care directive, financial power of attorney, and beneficiary designations. Estate planning is an important way to ensure that your financial and physical property is passed down to whomever you choose. This plan should also ensure your minor children are cared for and your wishes are followed in the event you aren’t able to make decisions for yourself.

Planning for a time when you may be mentally or physically incapacitated isn’t anyone’s idea of a good time. But it is an important part of life that can help smooth the process for those you leave behind.

Today we’ll talk about the importance of the estate planning process, what you need to do, and the documents and decisions you will be faced with. Getting your personal and financial affairs sorted out will help make the transition as easy as possible for friends and loved ones. First, what is an estate plan and why do you need one?

What is an estate plan?

You may think you don’t have an “estate” to plan for, but pretty much everyone does. Your estate is simply everything you have, including property, cash, bank accounts, and personal property. Estate planning is the process by which you organize your physical and financial assets and outline what you want done with your estate when you die.

Why estate planning is important

If you’ve ever had someone pass away in your family that didn’t have a will or any type of estate plan in place, you know what a lengthy, drawn-out process it can be. In fact, according to a Gallup poll, less than half of Americans even have a will, which can provide an added strain to those who are grieving and, possibly, trying to make ends meet in the face of a death.

Plus, the hard truth is that if you don’t designate who gets your things, the court will decide for you, and it might go against your last wishes.

Example: Let’s say you’re separated from your spouse, but not divorced. If you die without at least leaving a will, in most cases everything you own will be passed down to your living spouse, even if you prefer to leave it all to your children instead.

10-step estate planning checklist

You may not need all of the following estate planning documents and advice, or you may need more if your estate is more especially complex. However, for most people, this list should cover your all your bases.

  1. Will
  2. Revocable living trust
  3. Advance health care directive (aka, living will)
  4. Financial and health care power of attorney
  5. Beneficiary designations
  6. Insurance policies and financial accounts
  7. Login and password information
  8. Identity documents, titles, and deeds
  9. Funeral directives
  10. Up-to-date estate plan

1. Last will and testament

Your will is arguably the most important part of your estate plan. This is where you will state who gets your things, including physical assets such as cars, real estate, art, and intangible assets like retirement and investment accounts. You’ll also decide who you want to take custody of any minor children or even pets.

Your last will and testament is also where you’ll designate an executor for your estate. You want this to be a personal representative you trust, which may or may not be a family member. You’ll also want to make sure that whomever you appoint feels they can handle the responsibility. (It’s also not a bad idea to have a backup candidate just in case.)

Pro Tip

Keep in mind that the courts will appoint an executor if you do not and the executor or personal representative they pick may not necessarily be the one you would choose. Eliminate that scenario by naming the executor in your will.

2. Living trust

A living trust is not for everyone, but some may find it beneficial. A revocable living trust is a legal arrangement whereby an individual (the grantor) establishes a trust to hold certain assets. The grantor then decides how to manage and distribute those assets both during their lifetime and after death.

The grantor will also appoint a successor trustee who will manage the trust if you’re incapacitated or when you die. The trustee will also distribute those assets to designated beneficiaries as dictated by the grantor.

One of the main reasons to set up a revocable trust is to pass down property without your heirs having to go through the (public, often lengthy) probate process. Other common reasons for setting up a trust include maintaining privacy, providing for underage family members or someone with a disability, and avoiding or reducing estate taxes.

3. Living will

Everyone should have a living will or advanced healthcare directive. This is a very important legal document that anyone over the age of 18 should have. It’s essentially a written statement detailing a person’s desires regarding their medical treatment in circumstances in which they are no longer able to express informed consent.

Perhaps most importantly, an advance directive is a way to express your desires about what you want for end-of-life care. Common directives might include a do not resuscitate order (DNR) or do not intubate (DNI).

You also want to spell out how you feel about tube feeding, dialysis, or other life-prolonging procedures. Many people do not want so-called “heroic measures” taken when they are close to death, and a living will ensures your wishes will be respected when you can’t speak for yourself.

A living will also lays out your wishes in any case where you can’t make medical decisions, either because you are unconscious or have diminished mental capacity, like from a brain tumor or head trauma. It’s important to note that you don’t have to be elderly to need a living will — accidents happen all the time.

4. Durable financial power of attorney

Another important legal document that should be considered an essential part of estate-planning basics is drawing up a power of attorney. If for any reason you are unable to handle your financial affairs, you want to designate someone you trust as your power of attorney. That way they have the power to make financial decisions and manage your financial accounts on your behalf.

Some people may choose to have a living will and also a financial and medical power of attorney, whereby someone is designated to make both your financial and healthcare decisions for you. Or, it could be two different individuals. This person is known as your healthcare proxy and will make medical treatment decisions for you when you are incapable of doing so yourself, based on your wishes.

5. Designating beneficiaries

Another critical element of your estate planning checklist is to designate beneficiaries to all of your financial accounts. This includes retirement accounts, brokerage accounts, life insurance policies, and any bank accounts you may have.

The beneficiary designation is very important because it allows your heirs to directly inherit these financial assets and avoid probate. Probate court can take a long time and your loved ones may need immediate access to your life insurance or retirement income just to make ends meet.

Pro Tip

It’s also a wise idea to designate contingent beneficiaries in addition to the primary beneficiaries. This is particularly true if some of your primary beneficiaries are older, like your parents. If one of them passes away, for instance, your retirement account or other assets won’t be able to avoid probate if you don’t have a backup beneficiary.

6. List your financial accounts and insurance policies

Make it easier on your loved ones or family members by keeping a master record of all your financial and investment accounts and insurance policies. Having all of this information in one place can save valuable time when you pass away and your family is trying to sort out the details of your life.

It can also be useful for you as you make your estate plan so you don’t forget anything. And having all of this information in one place will make it easier for you to update as you go through life changes.

If you haven’t yet had the opportunity to find the right life insurance policy, take some time and compare the options below.

7. Login and password information

Additionally, you can make a list of how your digital assets can be accessed, including login and password information. Of course, all of this is extremely sensitive information, so be sure to store it securely while still letting at least one trusted person know where to find it in the event something happens to you.

8. Identity, deed, and title documents

A fire-proof safe or safe deposit box are good places to store all of your estate-planning documents, and your identity documents should be included there as well. This includes your birth certificate, Social Security card, and other items such as your passport, green card, or anything needed to prove who you are.

Along with everything else, you’ll want to store any titles to cars, boats, or other vehicles, and the property deed to your home or any other real estate you might own. As you pass down your physical assets, your heirs will need access to these documents along with your last will and testament, living will, power of attorney, and so forth.

9. Funeral instructions

It’s hard enough when someone passes away; even more so when you have to try and decide what kind of funeral arrangements someone would want. Save your family the agony of having to decide between burial or cremation, funeral or memorial service, or other details regarding the disposition of your body.

By remaining practical and sorting out (and even pre-paying) your funeral directives, you ensure that your wishes are followed and make certain that no one else will have to make those important decisions in your place.

As part of your funeral arrangements, you may also want to include access to your social media accounts and how you want them to be dealt with upon your death. For example, a close friend could use your social media to alert others to your death and give out practical information about when and where funeral services will be held.

Related reading: Though funerals are expensive, you can rest assured that there are several financing solutions available to you. To learn more about these options, take a look at our articles on funeral loans and financing.

10. Update your estate plan periodically

You may think you have all your ducks in a row — you have a will, an advance health care directive, power of attorney, and all the rest. However, you should still revisit your estate plan periodically. This is especially true as you go through major life events or your financial situation changes.

For example, as births or deaths occur, you may decide to alter beneficiary designations or add contingent beneficiaries, make changes to your revocable trust, or update your life insurance policy. An estate plan is meant to be fluid and should be reviewed occasionally as financial matters change or other events occur.

IMPORTANT! No matter how young and healthy you are, anyone can start drawing up an estate plan. It’s the only way you can guarantee having the final say on what happens to you and your property when you die or are incapacitated in any way.

FAQs

Do you need an estate planning attorney?

If you’re relatively young and/or have an uncomplicated financial situation, you may not need an estate attorney at all. The internet has a ton of tools you can use to create a will, advanced healthcare directive, and other estate planning documents.

However, if you have a lot of assets, are a business owner, or are concerned about inheritance taxes, seeing an estate planning attorney is a good idea. You would also want an attorney’s office involved if you’re setting up a revocable living trust as this is a complex process. In any event, if you do decide to create your own estate plan, it’s not a bad idea to have an attorney’s office verify that you’ve dotted all your i’s and crossed all your t’s.

What is the most important decision in estate planning?

The most important decisions for those making their estate plan can vary a lot from person to person. For instance, if you have underage children, your priority is probably to make sure they’re taken care of if you die prematurely. This means designating a legal guardian for them and ensuring they’re taken care of financially, like with a trust.

If you’re single, on the other hand, your priorities are probably quite different. In that case, you may want to leave your property, retirement income, and other assets to your siblings, nieces and nephews, charity, or to the friend who’s agreed to care for your beloved pets.

Key Takeaways

  • Start with an estate planning checklist to help you to put your financial, medical, and funeral affairs in order so your family doesn’t have to when you’re gone.
  • Estate plan basics should include at least a last will and testament, a living will, power of attorney, and designated beneficiaries.
  • It’s useful to store all of your essential documents together, including lists of financial accounts, retirement accounts, identity documents, and insurance policies.
  • Give a trusted friend or family member the power to make financial and healthcare decisions for you in the event that you’re unable to make these important decisions yourself.
View Article Sources
  1. Living wills and advance directives for medical decisions — Mayo Clinic
  2. Your Guide to a Living Trust — Illinois State Bar Association
  3. Do Rich People Even Need Life Insurance? — SuperMoney
  4. Life Insurance Retained Asset Accounts: A dubious deal for a death benefit — SuperMoney
  5. What Is a Successor Trustee? Duties & Powers — SuperMoney
  6. Contingent Beneficiary vs. Primary Beneficiary: Definitions and Examples — SuperMoney
  7. Guaranteed Life Insurance: Should You Buy It? Pros and Cons — SuperMoney
  8. Per Stirpes vs. Per Capita: What’s the Difference? — SuperMoney
  9. I Need Life Insurance. What Kind of Life Insurance Should I Buy? — SuperMoney
  10. Family Trusts — SuperMoney
  11. How To Make a Will: A Step-by-Step Guide — SuperMoney