How this simple estate planning guide can help you
While retirement planning is all about living the last third of your life to its fullest, estate planning addresses matters that arise after your death.
There will be times in your retirement planning when you’ll have to put your own future first, but creating a solid estate plan is about taking care of loved ones when you’re gone.
It’s your way of protecting your family from unnecessary financial burdens and blessing them with the wealth you worked so hard to build. Having a plan in place is one of the most loving things you can do for them.
I know, it’s not the most pleasant thing to think about dying. But, the reality is, nobody gets a pass and there is a 100% chance that it’s going to happen to you. The inconvenient truth is that you don’t know when that’s going to happen – so it’s best to be prepared now!
That’s why I created this ultimate estate planning checklist and guide. These estate planning basics cover the essentials to help you understand the pieces of the plan, and which ones you may want to include in yours.
Just keep in mind that it’s strictly for informational purposes.
Everybody’s situation is unique, so don’t ever take someone’s recommendations unless you know they are the best for you and your family.
It’s important to be aware that creating an estate plan is a complex process with legal requirements, and should be done with the help of an estate planning attorney. There can be serious consequences to doing it yourself, which may only be made known after you’re gone!
With that said, let’s dive in to this estate planning checklist guide to learn how to build a thorough estate plan and leave a lasting legacy for your loved ones.
Estate Planning Checklist Item #1:
KNOW YOUR NET WORTH
The first item on this estate planning checklist is calculating your net worth.
Your net worth is basically everything you own minus everything you owe. What you’re left with is a snapshot of your estate’s total value.
This will help you know if your estate will be subject to federal taxes. Also, find out if your state imposes its own estate and/or inheritance tax.
Most likely you will be exempt from federal estate taxes, because the exemption (as of 2021) for an individual is $11.7 million and $23.4 million for a couple. (These amounts are how much you can leave for your beneficiaries without owing any federal taxes on the inheritance.)
Each state, however, has its own tax laws surrounding estate tax (see step 3 below), and these exemption amounts are typically much lower than the federal limits. So, be sure to take both into account after you calculate your net worth!
Your net worth will always be changing, based on your changes in assets and liabilities. Remember, it’s a snapshot of this point in time. So check it regularly to make sure you’re still within the limits of estate tax exemptions.
For specific instructions on how to figure out your net worth and get a free worksheet, click on over to my post about calculating your net worth.
Estate Planning Checklist Item #2:
INVENTORY YOUR ASSETS
When you calculated your net worth, you included your financial assets.
However, you may also have additional assets that weren’t included in your net worth, because they hold more sentimental value than financial.
To create an inventory of your assets, include a complete list of everything that has value to you and that you intend to leave behind for your heirs.
Your list will include items such as:
- Tangible assets, like your house, car, any collectibles and other personal possessions
- Intangible assets such as your bank accounts, retirement accounts and life insurance policies
- Sentimental assets such as family heirlooms, jewelry, photo albums and china.
As you make your list, start thinking about the people in your life you’d like to leave them to.
One of the benefits of building an estate plan is that you can make these decisions while you’re still alive. You can talk to your loved ones and ask them what they would most appreciate receiving.
Estate Planning Checklist Item #3:
UNDERSTAND ESTATE TAXES
Although you’ll most likely be able to dodge federal estate taxes, you still need to know what your state’s rules will require from your heirs.
Some states impose their own estate tax while others have a separate inheritance tax. There are even states that have both, but many don’t have either.
The majority of state tax exemptions are lower than the federal thresholds, so it is possible that those who inherit part of your estate will owe some taxes. Know your state’s tax laws so you can make your beneficiaries aware of what to expect.
Also, there are strategies you can use to prevent a tax bill if your combined assets with your spouse exceed the federal limit. For example, a wife may use a portion of her deceased husband’s unused exemption to prevent her children from paying taxes upon her own death. However, certain deadlines and rules must be met for this strategy to be successful.
A little extra effort in learning how estate taxes work could ultimately save your heirs from having to pay a huge tax bill on their inheritance.
Estate Planning Checklist Item #4:
CHOOSE YOUR BENEFICIARIES
Step 4 of the estate planning checklist is to assign and record the beneficiaries you choose.
By creating an estate plan, one of your objectives is to make the process of distributing your estate to your beneficiaries less of a burden after you’re gone.
One way to do this is to allow for your plan to avoid probate, or at least simplify the process.
If you create a living trust, any assets within the trust will be protected from probate.
But, if you choose not to go this route, there are certain things you can do to reduce what does go through probate.
Submitting the proper beneficiary forms for all applicable assets will make those items “payable on death” and skip probate. These assets include:
- Bank accounts
- Retirement accounts
- Life insurance policies
- Stocks, bonds and brokerage accounts
Typically, beneficiary designations will overrule what you’ve laid out in a will. It’s important that the names you submit are correct and current, so make sure you review them periodically.
If you can’t remember who you’ve named for what, it’s time to revisit those assets and confirm your intentions line up with what’s recorded.
Be sure to:
- Check all accounts and file every beneficiary form available
- Do not leave any beneficiary form blank
- Name contingent beneficiaries
- Keep these names correct and up to date
There are certain circumstances which could still require your chosen beneficiaries to go through the probate process. When a beneficiary is a minor or becomes incapacitated, the state will likely intervene with the distribution of these assets.
Of course, your beneficiaries do not always need to be individuals. You also have the choice of leaving assets to charity, and this will also need to be stated clearly in your plan.
As you make the important decisions surrounding who gets what, think of your objectives. Consider the impact your choices will have on your loved ones, and what seems best for each person. For example, you may want to delay an inheritance for a younger beneficiary so the assets aren’t handled irresponsibly.
You want the decisions you make within your estate plan to line up with your values and priorities. You also want those decisions to be a blessing to your loved ones, not create conflict or burdens.
So, take your time and be intentional about who you want your beneficiaries to be. Your legacy depends on it!
Estate Planning Checklist Item #5:
WRITE A LEGAL WILL
According to a recent survey, 60% of Americans aged 45-54 don’t have a legal will or living trust.
This puts the majority of those who are in their highest income-earning years at great risk because, without one, the state will decide what happens to your assets when you’re gone.
There are 4 main types of wills: simple, testamentary trust, joint, and living.
- A simple will states who will receive your assets and who will be the guardian for your minor children. This type of will is executable upon death and must go through probate.
- A testamentary trust is established after death, and is a provision defined in the will that directs your estate’s executor to create the trust. This is also known as a “will trust”, and although similar to a living trust, is irrevocable and must go through probate.
- A joint will is typically signed jointly by two spouses to leave all assets to the surviving spouse.
- A living will allows you to enforce your chosen medical treatments if you become incapacitated. As the name implies, this type of will is enforced while you’re still living but unable to express your wishes for medical care. This will does not address the distribution of assets upon death.
Wills address some critical decisions in your estate plan, including:
- Which heirs will receive what assets from your estate
- The executor you’ve named to pay your remaining debts and distribute your estate according to your will
- The guardian for your minor children should both you and your spouse die before they reach adult age
- The medical care you wish to receive should you become incapacitated or too ill to communicate your preferences
- Many other final wishes, including cancelled debts, organ donation, pet care, funeral arrangements, and allocating business assets
Obviously, these are major decisions with significant consequences, and so they need to be recorded according to state law.
In other words, writing your will on a paper napkin will not hold up in court. In fact, if any piece of your will is invalid, the whole document can be thrown out! This is a good enough reason to have your will written up by an attorney, or at least have it reviewed by one.
You can have more than one type of will and they can all be legal and valid. In fact, both a simple will and a living will are important pieces of a complete estate plan, since they each address completely different issues.
Educate yourself on the importance of having a will as part of your estate plan. Nobody is promised tomorrow, so today is the best day to include this in your estate planning checklist.
Related post: What Happens If You Don’t Have A Living Trust?
Estate Planning Checklist Item #6:
NAME YOUR EXECUTOR
This step is a part of writing up your will, but I’m listing it as a separate item because it’s a major part of your whole plan.
Choosing which person you trust enough to manage your estate and carry out your final wishes after you’re gone is one of the most important decisions you’ll make when creating your will.
Your executor will be responsible for various duties such as:
- filing papers with the court
- conducting an inventory of your entire estate
- having your final taxes prepared and filed
- making sure your heirs receive what you’ve intended for them
- closing accounts like credit cards and memberships
- notifying social security of your death
- paying final bills and expenses with estate funds
It’s a good idea to talk to the person you have in mind before you write him/her into your will as the executor of your estate. Ideally, this person should be trustworthy, responsible, reliable, and organized.
Lastly, choose an alternate executor who can step into the role easily in the event your first choice is no longer available.
Estate Planning Checklist Item #7:
CREATE A DISABILITY PLAN
Estate planning is not just about deciding what happens to your stuff after your death. An important piece that many people overlook is a plan for what happens if you become disabled while you’re still alive.
Don’t skip this step on the estate planning checklist!
According to the Center for Disease Control and Prevention, over one-fourth of American adults have a disability. The risk of getting a disability only increases as you get older.
Part of your disability planning should include insurance policies that will protect you from losing income and savings if you become disabled.
Many employers offer short-term disability and long-term disability insurance, which will partially replace your income if you are unable to work. These policies give you a means to still provide for your family while you are on disability leave, but they are only effective until you reach 65 years of age.
Long-term care insurance also protects your savings in the event you acquire a chronic medical condition, disability or disorder. But, instead of replacing income, this type of policy covers costs such as assisted living facilities, nursing homes, and in-home medical care.
There are also no age requirements for long-term care, though the premiums get increasingly more expensive as you get older. Also, if you wait until you need it, you won’t qualify (so plan ahead!).
Another part of a disability plan is an advance medical directive. This legal document includes your written instructions for medical care if you ever become mentally or physically unable to make your own decisions or sign anything. It protects you from a state-appointed guardian making these decisions for you.
An advance medical directive document can be a part of your living will, a durable power of attorney for healthcare, or a living trust. In your directive, you would name a healthcare agent, who would handle your healthcare decisions when you are no longer competent. The agent would carry out your wishes according to your medical directive.
If you do not have an advance medical directive in place before you become incapacitated, the state will appoint a guardian to make your healthcare decisions for you. This can be an expensive process, and obviously an undesirable one that you want to avoid. Fortunately, it can be with some advance planning – just make sure you consult with an attorney to ensure you’re complying with state laws.
In addition to healthcare decisions, you can also appoint someone to handle your finances in the event you are unable to do so yourself.
This is accomplished with a durable financial power of attorney, which grants the financial agent you’ve identified the legal authority to act on your behalf for financial issues.
While you work toward financial independence and dream about retirement, remember to prepare for the possibility of life not going as planned. As the average person’s life span continues to increase, so does the possibility of living with a serious disability.
Put together a plan that will protect you, your wealth and your loved ones in case you are ever in need of extensive healthcare.
Estate Planning Checklist Item #8:
WRITE A LEGACY LETTER
A legacy letter, also known as an “ethical will”, isn’t a legal document. Therefore, this step is optional.
However, it accomplishes an important part of leaving a lasting legacy.
While a will addresses who gets your valuables, a legacy letter expresses the passing down of values.
Writing an ethical will gives you the opportunity to:
- share your thoughts and memories about life
- write prayers and blessings
- pass down family stories, life lessons, and personal values
- extend forgiveness, apologies or gratitude
- express your hope and dreams for the future
Leaving such a personal gift for your loved ones can help connect your life to future generations in your family.
Another benefit of writing a legacy letter is the inspiration you may have to start living out your values more fully while you’re still alive!
Estate Planning Checklist Item #9:
PLAN FOR YOUR REMAINS
Don’t leave this up to those you’ve left behind. Talk about it with your spouse, but also put it in writing. This will save those who plan your funeral the difficulty of making that decision themselves – and not everybody may agree.
The formal and legal way of making your wishes known is with a disposition of final remains.
This document can outline:
- cremation or burial
- an out-of-state burial
- type of service you’d like
- your chosen burial plot or mausoleum
In the disposition, you can designate one competent adult (called a designee) to carry out your wishes.
It’s always a good idea to also include an alternate, in case the designee is unavailable. Just be sure to have a conversation with them to make sure they are comfortable with this role.
This document is revocable, which means you can make changes as necessary before you die. If you change your mind about the decisions you’ve made, be sure to update the disposition so it reflects your current wishes.
Estate Planning Checklist Item #10:
DECIDE ON HAVING LIFE INSURANCE
A common way for people to take care of their loved ones after they’re gone is with a life insurance policy. This can be a great way to provide for your family in the event of your death, but it’s not always the best decision.
You may want to consider getting life insurance if:
- you have a spouse and/or children depending on your income
- you have debts you’d need to pay after your death
- you want to protect the lifestyle of your family
Once you reach your 50s and your children are reaching adult age, you may not feel you need life insurance. Especially if you have plenty of assets for the spouse you’d leave behind.
As you get older, premiums get more expensive. This could be another deterrent to signing on with a policy if you didn’t start one when you were younger.
You’ll need to decide if a life insurance policy should be included on your estate planning checklist, and if it lines up with your objectives in your estate plan. But the sooner you decide, the better!
Estate Planning Checklist Item #11:
DECIDE ON HAVING A LIVING TRUST
A trust is similar to a will in that it is a legal written document you create to express your wishes for your assets, dependents, and heirs.
The main difference is that a will does not go into effect until it enters probate after your death, but a trust bypasses the probate process and allows the successor trustee (similar to an executor) to distribute your assets directly to your beneficiaries.
There are some additional benefits to having a trust-based estate plan instead of a will-based one, but in certain circumstances, those benefits may not outweigh the higher cost.
When you create a living trust, your assets are “funded” into the trust and become property of the trust. The trust creator can still access these assets while alive, but upon death, the assets are transferred directly to the designated beneficiaries.
A living trust can provide certain protections and conveniences for your heirs, such as:
- avoiding the probate process
- saving probate expenses
- expediting the distribution of your assets
- protecting your family’s privacy
- providing peace of mind
A living trust can also include your advance medical directive and power of attorney, so the successor trustee can carry out your instructions if you’re unable to manage your financial, healthcare, and legal affairs due to incapacity.
The best thing to do is talk to an estate planning professional to help you decide if creating a living trust is the best option for you. The cost is considerably higher than just writing a will, so you’ll need to weigh the benefits with the expenses.
VIDEO: Estate Planning 101
Estate Planning Checklist Item #12:
ADVANCED ESTATE PLANNING
Generally, those with a very high net worth (in the millions) would consider advanced estate planning. The main purpose of advanced estate planning is to reduce taxes so a person’s heirs would receive the highest benefit possible under federal and state tax laws.
I know, I know … if you’re reading my blog then you’re probably not rolling in the dough right now.
But who knows what will happen? Maybe great Aunt Melba will leave you a surprise inheritance or you’ll win big the next time you’re in Vegas.
*Or* maybe you’ll start your own side business and it will take off like you never dreamed possible and money will start pouring in and one day you wake up and see 7 figures in your bank account.
Just know that if you ever reach millionaire status, you should pursue advanced estate planning strategies to maximize protection of your assets.
Estate Planning Checklist Item #13:
PROTECT YOUR BUSINESS
If you’re a small business owner, you have a lot on your plate. As an entrepreneur, you probably have to wear many hats and fill several different roles just to keep your business moving forward.
This is why it’s vital to have a plan to protect your business from collapse in the unfortunate event of your death.
A substantial life insurance policy may support your family if your business is unable to continue.
But, if ownership transfers to your spouse, you risk your business being run by someone without the skill or the desire to make it successful. If you have partners, this may create some disagreements over how the business should be managed.
To minimize complications, make sure you have a written agreement that has been read and signed by all major stakeholders.
This is called a buy-sell agreement and typically ensures that your business partners will end up with your share in the business, and your family will receive the proceeds from selling it.
If you have a business, be sure to include protecting its assets and operations in your estate planning checklist.
Estate Planning Checklist Item #14:
GET PROFESSIONAL HELP
As you can tell, estate planning is not for the faint at heart. Putting together a comprehensive plan takes diligence, intention, and a thorough knowledge of estate law – which most people don’t have.
Unless you have very basic needs for your estate, hiring an estate planning attorney is probably the best thing to do.
Here are just a few reasons you should seek professional help:
- you have minor children
- you own a business
- you’re recently divorced
- you’re in a 2nd marriage
- you’re part of a blended family
- you have special needs children
- you want to avoid probate
- you want to keep your records private
- you want to leave some or all to charity
- you own out-of-state real estate
Because the documents within your estate plan are legally binding, one wrong word or one missing signature can change the entire intent of a will or trust. Unfortunately, by the time your family finds out, it’s too late.
Play it safe and hire an estate planning attorney. It is a considerable investment, but it’s worth it for the peace of mind knowing your family will be securely taken care of.
Estate Planning Checklist Item #15:
ORGANIZE YOUR DOCUMENTS
After all the work you put in to get the necessary documents created, the last thing you want to do is make it difficult for your family members to find them.
They will already be in great distress as they mourn your passing, so one way you can make things easier for them is by keeping your estate planning documents organized and easily accessible.
Designate a safe and secure place to store your documents, and then let your spouse or other trusted family member know where that is.
Dave Ramsey suggests having a “legacy drawer“, which holds all of the important information your family needs if something serious happened to you.
If you’re concerned about theft or damage, you could keep yours in a safe or an off-site safe deposit box. Just make sure your family knows the code and where to find it!
Here are a few items you’d want to keep in your estate planning file:
- will and estate documents
- insurance policy information
- legacy letter
- list of financial accounts
- list of passwords
- list of digital accounts and logins
- business information
- birth certificate and social security card
- list of favorite charities
Be sure to label everything clearly and keep all your paperwork in an organized fashion.
You could even include a written list of contents so your family knows what to look for. It’s one way you can take care of your loved ones after you’re gone.
Estate Planning Checklist Item #16:
REVIEW YOUR PLAN
It’s wise to plan for an untimely death, but the likelihood (and hope) is that you’ll live a good, long life. And the longer you live, the more twists and turns you’ll experience. Change happens.
The plan you create today is based on your current circumstances. But, as those circumstances inevitably change, you’ll want to make sure your plan continues to align with them.
Including an annual review of your estate planning checklist will ensure your estate plan is always up to date.
These are some life changes that may alter your estate planning:
- your kids will grow up and have families of their own
- you may get divorced and remarried
- your spouse may pass before you
- those you’ve named as executor, guardian or trustee may no longer be the best choice
- your net worth could substantially change
- federal and/or state laws may change
- you may outlive some of your beneficiaries
Keep reviewing your plan as life happens. You want your decisions to reflect what is relevant today, not yesterday or 20 years ago.
Remember, an important purpose of this whole process is to bless your family after you’re gone. If you fail to update your wishes as necessary, you may unintentionally leave your assets to the wrong person!
Estate Planning Checklist Item #17:
COMMUNICATE YOUR PLAN
It’s not the most pleasant topic to talk about when you’re going to die. But, it’s a part of life and there’s no getting around it.
Yes, it may be awkward and uncomfortable, but having these conversations is one of the most considerate things you can do for your loved ones.
Let your family and heirs know what your plan is. This allows for any needed clarification and gives them the opportunity to ask questions. It also makes them aware of your expectations when you’re gone.
Communicating your decisions should also prevent any surprises that might create conflict. If you think there are people in your life that may be disappointed with your choices, you have the chance now to mend any hurt feelings. Once you’re gone, it’s too late.
You can choose to have one big announcement gathering where you address everyone’s concerns at once, or you can meet with each heir individually. The important thing is to make sure every person that’s connected to your plan knows what to expect.
In summary: Don’t wait, start now
Creating an estate plan can be a daunting undertaking.
Just thinking about all the paperwork, the laws, the attorneys, the expense – not to mention all the decisions you have to make – can easily cause a severe case of procrastination.
According to a 2019 survey, only 40% of Americans have some form of estate plan in place. The number one reason why most don’t?
You guessed it – they just haven’t gotten around to it.
Even though we all know that none of us are promised tomorrow, we tend to live with the expectation that we have a lot of time left. We put off saving money and getting out of debt. We leave broken relationships on the shelf. We keep pushing our dreams into the future, thinking maybe someday.
One of the greatest human struggles is learning to live life fully in the present. Letting go of past regrets and not being paralyzed by future worries. So many times we forego the richness of today because we’re too busy looking behind or ahead.
All of this estate planning stuff is about so much more than just being prepared, avoiding taxes, and giving money away. You’re coming face-to-face with your mortality and the realization that your time on earth, with all of these people you have loved and done life with, is limited.
It can change your perspective and priorities. And it can help you live more fully in the moment.
If you’re struggling with making a plan, I just want to encourage you to start taking steps. Use this estate planning checklist to write down some ideas in a journal and think about what you’d want your legacy to look like. Not just your money and possessions, but your values and your hopes as well.
Get comfortable with thinking about your impact on others’ lives even after you’re gone. How do you want future generations to remember you? How do you want to continue taking care of your kids and grandkids?
As you define these thoughts for yourself, you’ll begin to move closer toward taking the necessary actions. Having a plan will become a priority once you have a vision and know what’s important to you.
Don’t put it off. Take what you’ve read here and other places and start piecing together a plan. Educate yourself and figure out what you want your legacy to look like. Make the investment to get professional help if necessary.
Your family is worth it.