Estate Planning: A Basic 7-Step Checklist - NerdWallet (2023)

• Houses, land or other real estate

• Vehicles, including cars, motorcycles or boats

• Collectibles, such as coins, artwork, antiques, or trading cards

• Other personal property

• Current and savings accounts and certificates of deposit

• Stocks, bonds and mutual funds

• life insurances

• retirement provisionsuch as 401(k) plans for the workplace andindividual retirement accounts

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• health savings accounts

• owned by a company

• Recent reviews of your home (use ourHome Value Calculatorto find out how much it's worth)

• Statements from your financial accounts

• Make sure you have adequate life insurance.— If your next question "How much life insurance do I need🇧🇷 It depends on factors like whether you're married and whether your current lifestyle calls for dual income. Life insurance can be even more important if you have a child with special needs or college tuition.

• Appoint a guardian for your children- and a backup guard, just in case - if youwrite your will🇧🇷 This can help you avoid costly family court disputes that can erode the assets you own.

• Document your wishes for the care of your children— Don't assume that certain family members will be there or that they will share your ideas and goals as parents. If the matter goes to court, don't assume a judge will grant your wishes.

• a promisemay be appropriate. Ordinaryrevocable living trustyou can allocate parts of your property to specific objects during their lifetime. If you become ill or unable to work, your chosen curator can take over. Upon your death, trust property passes to your designated beneficiariesstate, which is the court process that can distribute your property. There is also an option to configure airrevocable trust, which cannot be changed or revoked by the creator.

• A health care plan, also known as a living will, states your desire for health care if you can no longer make these decisions yourself. You can also give a caregiver a power of attorney for your health care, giving that person authority to make decisions when you can't. These two documents are sometimes combined into one, called a living will.

• A permanent financial power of attorneyallows someone else to handle your financial affairs when you are medically unable to do so. Your designated agent can act on your behalf in legal and financial situations when you are unable to do so as stated in the document. This includes paying your bills and taxes and accessing and managing your wealth.

• a limited power of attorneyit might come in handy if you're worried about handing everything over to someone else. This legal document does exactly what its name suggests: it sets limits on the powers of its designated agent. For example, you can authorize the person to sign documents on your behalf when completing a home sale or selling a certain stock.

• Be careful who you give power of attorney to.They can literally have your financial well-being - and even your life - in their hands. You can assign medical and financial representation to different individuals, with a backup for each in case your primary choice is not available when needed.

» Immerse yourself in the differences: Revocable trust vs. irrevocable trust

• Check your retirement accounts and insurance. Retirement plans and insurance products often have beneficiary identifiers that you need to keep track of and update as needed. These beneficiary designations can replace what is written in a will.

• Make sure the right people get your stuff. People sometimes forget the beneficiaries they named in policies or accounts created many years ago. For example, if your ex-spouse is still your life insurance beneficiary, your current spouse will get the bad news — and no policy payouts — after you leave.

• Do not leave recipient sections blank. In that case, if an account goes through probate court, it can be distributed based on state rules about who gets to own the property.

• Designate those entitled to conditions. These backup beneficiaries are crucial if your primary beneficiary dies before you and you forget to update your primary beneficiary designation.

• At the federal level, only very large estates are subject to inheritance tax. For 2021, up to $11.07 million of a property is exempt from federal taxes. In 2022, up to $12.06 million is tax-free. What if you have a larger property that exceeds federal tax exemption limits? You might want to consider aGrantor entrusted to the Annuity Fund, or GRAT, a type of irrevocable trust that can help reduce the taxes your heirs must pay.

• Some states have real estate taxes. You can charge inheritance tax on properties whose value is less than the federal tax exemption. 🇧🇷See which states have an estate tax here.)

• Some states have real estate taxes. This means that people who inherit your money may have to pay taxes on it. 🇧🇷Learn more about inheritance tax here.)

• If your estate is small and your desires are simple, an online or bundled will program may suffice for your needs. These programs usually take into accountIRSand country-specific requirements and guide you through the process of writing a will using an interview process about your life, finances and estate. If necessary, you can even update your own will.

• If you have any concerns about the process, it may be worth consulting with an inheritance attorney and possibly a tax advisor. They can help you determine if you're on the right track for estate planning, especially if you live in a state with its own estate or inheritance taxes.

• For large, complex estates - think special child care issues, business matters or non-family heirs - a probate attorney and/or tax professional can help deal with the sometimes complicated implications.

• Revise your estate plan as your circumstances change, for better or worse. This could include marriage or divorce, the birth of a child, the loss of a loved one, starting a new job, or being fired.

• Review your estate plan regularly, even if your circumstances don't change. While your situation may be the same, the laws may have changed.

• It will take some effort to revise your plan, but be brave. The need to revise means you've already avoided the biggest estate planning mistake: making no plans at all.