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What Are the Basics of an Estate Plan?


Estate Planning 101

From outlining your final wishes in a will to creating trusts, designating guardians, and addressing tax implications, an estate plan comprises a comprehensive set of legal strategies tailored to your unique circumstances. By crafting a well-thought-out estate plan, you can define how your assets will be managed, distributed, and protected during your lifetime and after your passing.

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The Basics of an Estate Plan

If you’re not sure what goes into an estate plan, we can help. Here are 12 basic steps you can take to make sure your estate is in order. Hit them, and you and your estate should be in good shape.

1. Inventory your assets

Inventorying assets involves the comprehensive assessment and documentation of all your possessions and financial holdings. This includes real estate, bank accounts, investments, retirement accounts, life insurance policies, valuable personal belongings, and any other assets of value. 

By creating a detailed inventory, you’ll gain a clear understanding of your net worth and ensure that no asset is overlooked or forgotten. This inventory serves as a valuable reference for your estate plan, helping you make informed decisions about how to distribute your assets among beneficiaries, minimize potential tax liabilities, and plan for the future. 

Regularly updating your asset inventory is essential, particularly when significant life events occur, such as purchasing new assets, selling property, or undergoing major financial changes. Through a meticulous inventory process, you can approach estate planning with confidence and provide a solid foundation for managing and preserving your wealth for generations to come.

2. Identify your beneficiaries

Determine who will receive your assets and property after your passing. Beneficiaries can include family members, such as spouses, children, and grandchildren, as well as friends, charitable organizations, or other individuals you wish to include in your estate plan. 

Properly identifying beneficiaries ensures your assets are distributed according to your wishes and avoids potential disputes or confusion among your heirs. It is essential to regularly review and update beneficiary designations in legal documents, such as wills, trusts, and retirement accounts, to reflect changes in your life circumstances, such as births, deaths, or changes in relationships. By clearly identifying your beneficiaries, you can ensure that your estate plan reflects your intentions and provides for your loved ones in the manner you desire.

3. Check beneficiary designations

Many of your assets, such as life insurance policies, retirement accounts, and bank accounts, allow you to designate beneficiaries directly. These beneficiary designations override any provisions in your will or trust. Therefore, it’s essential to review and update beneficiary designations regularly to ensure they align with your current estate planning goals and avoid unintended consequences.

Failing to update outdated beneficiary designations could lead to unintended consequences, leaving loved ones without the financial support you intended for them. By proactively reviewing and adjusting beneficiary designations, you can protect your assets and ensure your legacy is passed on to the right beneficiaries as you desire.

4. Assess the benefits of trusts

Deciding if a trust is the right addition to your estate plan requires thoughtful consideration of your unique circumstances and objectives. Trusts offer numerous benefits, such as probate avoidance, asset protection, and tax planning opportunities. 

If you have substantial assets, complex family dynamics, or a desire to provide ongoing support for beneficiaries, a trust may be a suitable option. Additionally, trusts can help ensure the smooth management and distribution of your assets according to your wishes, even after your passing. 

However, creating a trust involves careful planning and administration, which might not be necessary for every individual. It’s essential to consult with an experienced trust professional or estate planning attorney to evaluate your specific needs and goals. By conducting a thorough assessment of your estate planning requirements, you can determine whether a trust aligns with your objectives to secure your legacy for generations to come.

5. Make a will

A Last Will and Testament, commonly known as a will, is the foundational document of an estate plan. It enables you to specify how you want your assets to be distributed among your beneficiaries, appoint guardians for minor children, and even designate specific individuals or charitable organizations to receive your possessions. 

Without a will, your assets may be distributed according to the laws of intestacy (a set of legal rules that determine how a person’s assets and property will be distributed if they die without a valid will),  which may not align with your preferences.

By taking the time to make a will, you can avoid potential disputes among family members and provide clarity regarding your intentions. It’s important to regularly review and update your will as life circumstances (such as marriage, divorce, or the birth of children) change. Seeking guidance from an experienced estate planning attorney can help you navigate the process and ensure that your will complies with legal requirements. 

6. Execute a durable power of attorney

A durable power of attorney is a legal document that designates a trusted person, known as the attorney-in-fact or agent, to make financial and legal decisions on your behalf if you become incapacitated. This person can manage your finances, pay bills, make investment decisions, and handle other critical matters in your stead. A durable power of attorney ensures that your affairs are managed smoothly and prevents the need for costly and time-consuming court-appointed guardianship proceedings.

7. Execute advance directives for health care

The two most common advance directives for health care are the living will and the durable power of attorney for health care.

A living will is a legal document that tells doctors how you want to be treated, if you cannot make your own decisions about emergency treatment. In a living will, you can say which common medical treatments or care you would want, which ones you would want to avoid, and under which conditions each of your choices applies.

A durable power of attorney for health care is a legal document that appoints your health care proxy, a person who can make health care decisions for you, if you are unable to communicate these yourself. It’s important that your proxy be familiar with your values and wishes. Having a health care proxy helps you plan for situations that cannot be foreseen, such as a serious car accident or stroke. A proxy can be chosen in addition to or instead of a living will. 

8. Designate guardians for minor children

If you have minor children, appointing guardians is a critical aspect of your estate plan. In your will, you can nominate individuals whom you trust to care for your children in the event of your untimely passing. This ensures that your children are provided with a stable and nurturing environment if both parents are no longer available to care for them.

9. Consider tax-planning strategies

For those with significant assets, estate tax planning is a vital component of an estate plan. Various strategies, such as gifting, establishing irrevocable trusts, and utilizing the lifetime gift and estate tax exemptions, can help reduce potential estate tax liabilities and preserve more of your wealth for your loved ones.

10. Incorporate charitable giving

If philanthropy is essential to you, incorporating charitable giving into your estate plan allows you to support causes that are close to your heart. Charitable giving can take various forms, including bequests in your will, setting up charitable trusts, or designating charities as beneficiaries of certain assets.

11. Create a document holder

A document holder is a designated physical or digital space where you can store all your critical records, such as wills, trusts, insurance policies, property deeds, financial statements, and healthcare directives. By centralizing these documents in one secure location, you ensure easy access for you and your loved ones in times of need. Whether you opt for a physical file organizer or a password-protected digital folder, a document holder helps you stay organized and prepared for any unforeseen circumstances. 

12. Make arrangements for any safe-deposit boxes

When creating your estate plan, consider designating a trusted individual as an authorized signatory to access the safe deposit box upon your passing. That will ensure your beneficiaries can easily retrieve the documents and assets they need during the settlement process.

Putting It All Together

An estate plan is a comprehensive set of legal documents and strategies designed to protect your assets, express your final wishes, and provide for your loved ones. Each component of an estate plan serves an important purpose in ensuring that your legacy endures as you envision. 

Estate planning is a complex process, and it is advisable to seek the guidance of an experienced estate planning professional to tailor a plan that aligns with your specific needs and goals. By taking proactive steps to create an estate plan, you can achieve peace of mind and leave a lasting legacy for generations to come.

About Norway Savings Asset Management

At Norway Savings Asset Management Group, we manage trusts and investments for people like you. We’re more than just financial advisors—we’re family fiduciaries—which means we’re both legally and ethically bound to put your interests first. We take the responsibility of safeguarding your assets incredibly seriously. We’re here to make sure your story lives on.

*This article is intended for educational purposes only and should not be construed as legal or tax advice.