The step-by-step guide to estate planning

An estate plan begins with an inventory of your assets, including:

• Bank and brokerage accounts
• Retirement accounts, pensions, and annuities
• Life insurance policies
• Real estate deeds
• Auto titles
• Digital accounts
• Furnishings, heirlooms, and artwork

Next, think about the goals of your estate plan. Do you have minor children who will need a guardian? Are there charities you wish to support? How will your assets be divided among your heirs?

Finally, decide who will be the executor of your estate—for example, a grown child or sibling. Check out our article, “Start your estate planning journey,” for more helpful tips.

Your Financial Advisor can help you find an estate planning attorney with expertise in the type of plan you need. There are two key components to an estate plan:

• A will is essential and simple to prepare but know that upon your death it must be settled in probate court, which can be lengthy, expensive, and public.
• A trust is private and settled quickly. It must be “funded” with your assets. Everything from bank accounts to wedding rings and real estate can be named as property of the trust.

For a deeper dive into these and more documents, read our article "Estate planning essentials: What you need to know.”

Broadly speaking, there are two types of trusts:

• A revocable trust is controlled by you, and you can change it at any time. But it offers no protection from federal estate tax, where rates can be as high as 40%.
• An irrevocable trust is out of your control and cannot be changed. But these more complex trusts can help your beneficiaries minimize estate and other taxes.

Other common elements of an estate plan include:

• Designating a financial power of attorney to manage your assets (including digital accounts and passwords) if you are incapacitated.
• Naming a health care power of attorney who can make medical decisions for you when you can’t.

You might be anxious about discussing your estate plan with loved ones, and they might feel some anxiety as well. So, it’s helpful for everyone involved to start slow. For example, you can start by making sure your beneficiaries know who your executor is and who holds powers of attorney.

How much or little you tell your beneficiaries is up to you. However, transparency throughout the estate planning process can help you avoid painful surprises and possible disputes after you’re gone. 

It’s a good idea to update your estate plan at least every five years, but it’s also recommended to update your plan immediately after major life events such as divorce or the death of a spouse or beneficiary.

Also, update your plan if you have a significant change in your financial situation. For instance, you may receive a windfall or need to take on unexpected debt. Changes in tax laws, both federal and state, might also warrant estate revisions.