Double-check your estate-planning checklist

Kim Last
Kim Last

Estate planning is a task that people tend to put off, however, those who leave this world without their financial affairs in order risk leaving their heirs some significant problems. Here are some suggestions to consider this year.

    Create a will. A solid will drafted with the guidance of an estate planning attorney costs more than a will-in-a-box, and may be the best money you ever spend. A valid will can save your heirs expensive headaches linked to probate and ambiguity.

    Complement your will with related documents. Depending on your needs, these could include a trust (or trusts), durable financial and medical powers of attorney, a living will and other items.

            A living will is not the same as a durable medical power of attorney. A living will makes your wishes known when it comes to life-prolonging medical treatments. A durable medical power of attorney authorizes another party to make medical decisions for you if you become unable to make these decisions.

            Review your beneficiary designations. Who is the beneficiary of your IRA; your 401(k); your annuities or life insurance policies? If your answer is “Mm … you know … I’m pretty sure it’s…”–check the documents.

            Beneficiary designations take priority over bequests made in wills and living trusts. If you long ago named an ex-spouse as the beneficiary of your life insurance policy, he or she will receive the death benefit when you die – regardless of what your will states. I recommend reviewing your beneficiaries every two years.  

            Create asset and debt lists. Providing your heirs with an asset and debt “map” they can follow makes them aware of the finer details of your wealth.

  • One list details real estate you own and its worth, personal property items in your home, garage, or small business that have significant monetary value.
  • Another list details your bank and brokerage accounts, retirement accounts, insurance policies, and other investments.
  • A third list details your credit card debt, mortgage, and consumer loans.

             Consider gifting to reduce the size of your taxable estate. At present, the lifetime federal gift, estate and generation-skipping tax exemption is unified and set at $5,120,000 until January 1, 2013. In 2012 you have the ability to gift up to $4.12 million more than the old $1 million lifetime limit.

            Consolidate IRAs and bank accounts. Consolidation means fewer statements, less paperwork and fewer administrative fees.

            Select a reliable executor. Is there a real possibility that your named executor might die before you do? If you change your mind about the way you want your assets distributed, can you easily communicate those wishes to that person?

            Your executor should have copies of your will, powers of attorney, healthcare proxy or living will, and trust documents. In fact, any of your loved ones referenced in these documents should also receive copies of them.

            Talk to the professionals. Do-it-yourself estate planning is not recommended, especially if your estate is complex enough to trigger financial, legal and emotional issues among your heirs.

            Keep in mind, money isn’t the only reason for an estate plan. You may not be a multimillionaire yet, but if you own a business, have a blended family, have kids with special needs, or can’t stand the thought of probate delays plus probate fees whittling away at assets you have amassed, these are all good reasons to create and maintain an estate plan. 

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