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7 Critical Tips for Estate Planning

estate planning

Beyond retirement, estate planning is one of the most important (and complicated) financial decisions a person can make, compounded by the emotions of contemplating one’s own mortality.

A Google search for “estate planning” results in more than five billion entries, while “estate planning services” populates another three billion. As the search results indicate, knowing where to start is often the toughest task of all.

Before sitting down on your own to determine how best to distribute your assets to your heirs, we recommend speaking with a fiduciary financial advisor. These financial professionals can help you assess what you have and how best to transfer your assets in the most tax efficient way.

SmartAsset’s free quiz simplifies the time-consuming process of finding a financial advisor. The short questionnaire can help match you with up to three fiduciary financial advisors, each legally bound to work in your best interest. Advisors are rigorously screened through our proprietary due-diligence process.

Here’s our take on seven critical steps for estate planning.

1. Define your objectives.

Estate planning has a straightforward yet daunting goal: to record a plan for distributing your life’s assets upon your death. Such a task is multifaceted. It encompasses elements of money, taxes, family dynamics and emotions.

Define your objectives early. What’s your ultimate goal? Is it to reduce strife between relatives after your passing, to minimize taxes or to support your favorite charities?

Start with your intentions, and your next steps will be clearer.

2. Inventory your belongings.

Before you can assign beneficiaries to what you own, you need to take stock of what you have.

Your assets include both the tangible and intangible, such as:

  • Homes, land and real estate.
  • Cars/boats.
  • Collectibles/antiques.
  • Sentimental family heirlooms.
  • Practical possessions (clothing, books, tools etc.).
  • Bank accounts.
  • Investments.
  • Life insurance policies.

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3. Consider your values.

After you’ve taken stock of what you have, take stock of what you want to leave behind. What legacy, memory or impact do you want to make?

Perhaps, as a first-generation degree holder, you have a high value for college education. Or, perhaps, you want nothing more than to enable the generations that follow you to have enough for down payments on their homes. What do you value?

4. Brainstorm your beneficiaries.

In most states, next-of-kin are the standard estate beneficiaries when a will doesn’t exist. But such a standard may not align with your wishes.

Perhaps your life has been enriched by a few close friends. Make a list of the people you’d want to receive a piece of your estate, then consider the legacy you want to leave with them, both practical and meaningful.

5. Prepare your inheritors’ tool chest.

This is the step that makes estate planning complex.

Tax implications hold significant power over the final value of inherited funds, while medical coverage, life insurance policies and other financial tools can be the difference between using up your resources in your final days versus retaining a nest egg to pass along.

Among the list of medical and legal considerations you should evaluate with a professional are the following:

  • Life insurance.
  • Trust.
  • Power of attorney.
  • Medical Care Directive (a.k.a. DNR).
  • Tax implications.

6. Enlist the advice of a pro.

If the above duties sound daunting, they can be. This is where a financial advisor can help. A licensed fiduciary is legally obligated to act in your best interest and can help navigate the ins and outs of estate taxes, life insurance, wills and trusts and more. Getting the right advice at the right time could save your beneficiaries significant tax liability and make the process less stressful.

Don’t know where to look? Try our free financial advisor matching quiz. You’ll answer a few questions and then be matched with up to three fiduciary financial advisors. You can compare your advisor matches based on their specialty, pricing and more.

7. Don’t “set it and forget it.”

A quality estate plan should always be updated. Beneficiaries’ needs change, as do tax laws. A will is a plan to reevaluate regularly. Our advice? Don’t do it alone. We recommend speaking with a financial advisor and evaluating your estate plan together.

Get your free financial advisor matches here.


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