If you haven’t planned financially and legally for your death, the time to start is now. Your goal is to secure transfer of ownership of your assets — your estate — ahead of time so that your loved ones don’t have to deal with excessive paperwork, go to court, or pay large fees or taxes. To plan your estate, follow this straightforward checklist:
Make a will
A last will and testament handles property and other assets that are not settled with a beneficiary agreement or joint ownership. A will designates an executor — that is, the person responsible for handling your estate — and also addresses guardianship of minor children or adult children with disabilities.
Name beneficiaries
Insurance and other policies have the option of naming the people who will benefit from the execution of the policy. Some assets, including those with title documents, can also have beneficiary arrangements. Be sure the people you want listed are listed.
Understand estate tax laws
Educate yourself on what taxes your estate may be required to pay upon your death. Most people’s estates are too small for estate taxes to apply, but check anyway.
Buy life insurance to cover death-related expenses
Different kinds of life insurance exist, but the goal here is to have adequate money to pay for your funeral and other estate-related costs.
Create a health-care directive
If you become very ill, you may not be able to make decisions about your medical care. Create a living will (also known as a health-care directive) that outlines your wishes, such as a do-not-resuscitate order. Include whether you want to participate in organ donation programs. Also, grant power of attorney for health care to someone you trust.
Assign financial power of attorney
Similarly, you should designate someone you trust to manage your finances if you become incapacitated.
Give gifts before death
Decrease the size of your estate by giving some of your wealth to family members while you are alive. Pay attention, however, to gift tax laws that may apply. These vary depending on your relationship and the amount of money you’re handing over.
Transfer property to joint ownership
Any asset that has a title, such as a real estate holding, has an option to automatically transfer the asset to a co-owner in case one co-owner dies. Be aware that joint ownership has complications, however. For one, while you’re alive, the co-owner must agree to any sale of or loan security applied to the asset.
Set up a living trust
Useful for larger, complex estates, a living (or “revocable”) trust transfers your property titles to a trust fund. As the trustee, you can add and subtract assets. If you are incapacitated, the designated successor manages the trust. When you die, the trust’s control is transferred to the successor, who handles disbursements to designated beneficiaries. You avoid probate (court of law’s assessment of a will’s validity) with a living trust.
Plan your funeral
Make your wishes known about the ceremony and burial and put those wishes in writing. Consider keeping this plan separate from your will, since funerals usually occur before a will is executed.
Store estate-related documents securely
Be sure your executors and attorneys know where your documents are, and keep them secure from fire, water damage, and theft.
The bottom line
While this checklist is a thorough and handy guide, not all steps will be applicable to all people. If a step isn’t relevant for you, simply skip it. However, once you’ve worked your way through this list, your affairs will be in order, and that’s a worthy goal.
