Estate Planning Checklist: 10 Steps to Follow

Estate plans are an essential part of your end-of-life plan and shouldn’t be neglected. Not having an estate plan can lead to confusion about your wishes, as well as emotional stress for your family. However, the estate planning process can become incredibly complex, especially if you have a large number of assets.

We created this guide to estate planning basics to help make the process simpler. Read on for ten tips for how to create an estate plan like a pro.

1. Assemble a team

Make it a priority to assemble an experienced team to help you create your estate plan. Collaborate with a financial advisor, tax professional, and estate planning attorney to map out a complete estate plan that’s customized for you.

Each person plays a critical role in the process and can provide invaluable legal and financial advice. By working with a team, you can maximize your beneficiaries’ inheritance and potentially reduce the tax burden that comes with an estate.

Most importantly, you and your team will create a plan that ensures your assets are distributed to the people and organizations you choose—with as little confusion as possible. 

2. Outline your wishes in your estate planning documents

Your estate plan should spell out your wishes regarding your assets and dependents at the time of your death. Without an estate plan, a judge may make those decisions for you in probate court.

To reduce the risk of your assets going to probate, include the following estate planning documents in your end-of-life strategy: 

• Advanced healthcare directive: Also known as an advance directive, an advanced healthcare directive is a legal document that offers guidance on medical treatments and healthcare services. An advance healthcare directive often contains two documents: a living will and healthcare power of attorney. 
  
• A living will—or a medical care directive—outlines the medical treatments you do and do not want to accept at the end of your life. Healthcare power of attorney (also known as medical power of attorney or healthcare proxy) assigns an individual the power to make healthcare decisions for you if you can’t make them yourself. 
• Durable financial power of attorney: Durable financial power of attorney (POA) gives an individual or organization the ability to make financial decisions in your name and on your behalf if you are unable to do so yourself. 
• Last will and testament:  A last will and testament is a legal document that includes your wishes for your possessions and dependents following your death.  During the will planning process, you can name your beneficiaries, designate guardians for minor children, and identify an executor of your estate. This person will be responsible for carrying out your wishes, as outlined in your will.
  

Pro tip: Don’t confuse will preparation with an estate plan. A will is an important part of your estate plan, but an estate plan provides an overarching strategy for your loved ones and assets following your death.

3. Set up guardianship for dependents

Next on the estate planning checklist: Consider who you would like to care for any dependents at the time of your death. These may include minor children, a loved one with special needs, or even aging parents under your care.

It’s essential to name a guardian to look after your dependents in your estate plan. Otherwise, a judge may appoint guardians for you. 

But before you name a guardian, make sure you talk to them ahead of time to get their consent. In addition, remember that they don’t have to be the person managing your child’s inheritance. You can name a third-party, such as a trustee, to oversee money or assets until your child is old enough to manage their inheritance themselves.

Another thing to consider: Naming a couple as co-guardians could get tricky if the couple divorces. Talk to your estate attorney about how to prepare for this circumstance. Finally, consider naming a backup guardian for your dependents, just in case your first choice isn’t able to care for them. 

4. Consider trusts

A trust is a legal container designed to hold money for your heirs. When you create a trust, you decide what you’re going to put into it, who gets what, and how it’s distributed.     

A properly structured trust can help ensure that your plan is executed exactly the way you intended. It may also protect your estate from entering probate, where a judge will make decisions about asset transfer and distribution. 

As such, it’s important to work with an attorney who specializes in estate planning and trusts to ensure you’ve chosen the right trust for your needs and structured it according to your wishes. 

Some of the most common types of trusts include: 

• Revocable living trusts: A revocable living trust allows you to revise or end the trust at any point before your death. Once you pass away, your revocable trust will become irrevocable.
• Irrevocable trusts: An irrevocable trust can’t be changed or terminated after you create it. While an irrevocable trust lacks the flexibility of a revocable trust, it offers an added layer of protection against lawsuits, creditors, and the IRS.
• Charitable trusts: A charitable trust allows you to donate money or assets to a charitable organization. Assets included in a charitable trust are no longer considered your personal property, which means they can pass to your beneficiaries without getting caught up in taxes or lawsuits.
  

5. Plan for federal and/or state estate taxes

Estate taxes are federal taxes on assets like cash, real estate, stock, and other valuable belongings. Generally, estate taxes are paid by your beneficiaries after they receive their inheritance and are due within nine months of your death. 

This may be a concern if much of your estate is not actually in cash. That could potentially mean selling assets, like a house or stocks you may have wanted to leave to an heir.

Luckily, there are preventative measures you can take to plan for estate taxes, like placing assets in an irrevocable trust or giving gifts to family members. Talk to a tax professional who can work with your attorney and financial advisor to determine which estate tax planning strategies may be appropriate for your circumstances.

6. Avoid probate     

Probate is the legal process of verifying your will through the courts. It can be slow, costly, and extremely public since probate cases are a matter of public record. In addition, a probate judge may make decisions you wouldn’t agree with if you haven’t outlined them in your estate plan.

Fortunately, you may be able to prevent your estate from going through the probate process. Tactics like writing and maintaining a will, designating an executor of your estate, and establishing a trustee to manage assets in a trust can reduce the risk of probate. 

For more information, discuss probate laws with your attorney and develop a plan to protect your loved ones from undergoing public court proceedings.

7. Prepare for long-term care

Take some time to work with your financial advisor and prepare for potential long-term care needs. You may also consider options like long-term care insurance, a type of insurance that helps pay for care while preserving your assets.

Make sure to discuss your options and come up with several plans, in case your health changes.         

8. Consider Income in Respect of a Decedent (IRD) taxes

Federal Estate Tax is not the only tax you need to be aware of. A little-known tax that hits people who inherit certain types of money is called Income in Respect of a Decedent, or IRD. If you die and you have income that hasn’t been taxed, your estate or your beneficiaries will have to pay income taxes on that money.

Examples of IRD-taxable income include: 

• Savings bond income
• Individual retirement account payouts
• Sales commissions 
• Other types of income you would have received had you lived
  

Consult with your tax professional to ensure you have a complete estate plan that covers all tax scenarios.

9. Keep your beneficiaries up to date

During the estate planning and will preparation process, you’ll have the opportunity to name your beneficiaries. It’s important to look out for a major loophole, though. Any money you have in accounts with named beneficiaries will go to those individuals, even if your estate plan says otherwise.

These accounts include but aren’t limited to:

• Retirement plans (401ks, IRAs)
• Life insurance policies
• Bank accounts
• Payable-on-death and transfer-on-death accounts   
  

Keep your beneficiary designations aligned with your estate plan to ensure there are no conflicts.

10. Don’t forget about digital assets

More than likely, you’ve thought of your physical belongings and money during the estate planning process. But don’t forget about your digital assets. 

You probably have treasured photos and important documents saved in social media accounts and digital file storage services. It’s also likely that your accounts are password-protected and may be inaccessible to others. 

Often, service providers won’t disclose a deceased person’s passwords, and there are very few laws to help in this situation. To reduce the risk of loved ones losing access to treasured memories or important documents, designate a “digital fiduciary” in your estate plan. 

That person will have the right to access digital information, including login names and passwords. You can also work with an attorney to shut down your online presence, if that’s your wish.

Take the stress out of end-of-life planning with an estate planning checklist

Planning for the end of your life can feel stressful and overwhelming. But, when you think about it, your estate plan helps protect your loved ones—mentally, emotionally, and financially.

Rather than putting off estate planning, use the estate planning checklist below to prepare for each step of the process. We’ve consolidated our ten tips into an easy-to-follow format you can use to streamline the process. 

Work through each step of the checklist with your attorney, financial advisor, and tax professional. In doing so, you’ll check off every box and establish a comprehensive plan for you, your loved ones, and your personal property.