5 Estate Planning Basics to Get Started

Investopedia defines estate planning this way: “Estate planning is the preparation of tasks that serve to manage an individual’s asset base in the event of their incapacitation or death. The planning includes the bequest of assets to heirs and the settlement of estate taxes.”

It is never too early to begin the process, and here are 5 basic steps to get you into the process.

Step #1: Know What You Have

The first thing to do is to inventory your stuff. Most people are surprised at just how much stuff they have, and they also had no clue as to its value. In planning on where it should go in the event of your death or incapacitation, you must have an inventory of your tangible assets. These can include:

  • Your home

  • Vehicles

  • Investments

  • Other real estate

  • Life insurance

  • High value tools or equipment

  • Ownership position in a business

  • Any tax advantaged accounts, such as health savings accounts or retirement accounts

  • Jewelry, art, or other luxury items

  • Other personal possessions


Using a database or spreadsheet, list everything and place a value on it. You may want to get the help of professionals to appraise some high value items.

Step #2: Determine Your Beneficiaries and Their Needs

Who do you want to be sure that you take care of in the event of your death? List your beneficiaries and what you would like to leave for them, considering their ages and needs. Assess your financial ability and what you would like to set up for them.

  • Examine existing retirement accounts and insurance policies.

  • Check existing accounts and policies for listed beneficiaries, as they may need to change.

  • Always have stated beneficiaries to avoid costs and delays of probate.

  • Name backup or contingent beneficiaries to be sure that you have covered all the bases.

Do you have enough insurance for your spouse and dependent children? Do you have the right type of policies, term life, whole life, value-building, etc. Are there other policies you can set up or investment accounts for special needs or education?

Step #3: Set Out Your Instructions

These are your directives for how your assets should be managed if you become incapacitated, your care in that event, and disposal of your assets at death.

  • Your Will – Name a guardian for your children. Also name a backup guardian as well. State your desires for the care of your children in the event of your death. In your will is where you will set out your directives for which beneficiaries inherit which possessions or assets, as well as if some of them should be held until they reach a specified age. Your goal is to be as specific as you can to avoid the necessity of the court making decisions.

  • Living Will or Medical Care Directive – Should you become unable to care for yourself or make decisions about your care, you want a living will that spells out who you want to make decisions about your care. You can also execute a medical power of attorney, but professional help will be necessary in setting up these documents.

  • Financial Power of Attorney – If you become incapacitated and unable to make financial decisions, this document names who you want to make those financial decisions for you.

These are particularly important documents, and particularly in the living will and powers of attorney, you are giving someone else complete power over your life and your finances and assets.

Step #4: Know the Value of Professional Help

There are online services that walk you through some or most of these documents. If you have a small estate and simple wishes, you may find this an adequate solution. However, when it comes to powers of attorney, large or complicated estates, and multiple beneficiaries, you should consider working with professionals.

Professional help is especially important if a business is involved, and definitely if there are multiple owners or partners. Special needs dependents could make professional help valuable.

Step #5: Periodic Review

As your situation changes, perhaps your business grows, or if you are building investments, you should set out a plan to review all these documents on a regular basis. If you experience major life or financial changes, you will likely want to amend these documents.

These are simply stated basics about a complex subject. At a minimum, a discussion with an estate planning professional could be invaluable in getting started properly.



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