Estate Planning 101
By: SHARON WATSON, CEBS, CTFA, CRPS®, CFP®
Senior Vice President, FCB Wealth Management & Trust Services
Oct 12, 2022 | 5 min. read
Ensuring that loved ones are prepared to carry out your desires after you are gone is important.
So what exactly is estate planning? At its very essence, it is exercising your right to determine who receives your assets and handles your responsibilities after your death or during incapacitation. The objective is to make sure your financial and health care decisions are carried out as you wish and that your beneficiaries receive your assets in the most cost-effective way possible.
Your circumstances and goals are unique, and your plan should be, too. Below, we paint a picture of some of the key steps that must be taken in order to construct a successful plan. Keep in mind that estate planning is not just for those over 50. Though life expectancies continue to rise, ensuring that those tasked with distributing your assets are equipped to carry out your wishes is important no matter how old you are. And it needn’t be difficult or overly complex.
As you set out to create your plan, you will need to:
1. Take Inventory
Nothing is more important than knowing what you own, whether it be tangible assets like your house, furniture, or car, or intangible financial assets like checking and savings accounts, CDs, retirement accounts, life insurance policies, etc. At this stage, you will inventory all of it.
2. Account for Your Family
Once you’ve gotten a handle on your assets, you’ll be able to think about ways to protect them and your family. There are lots of questions to consider. Do you have life insurance? Is it the right type and amount of coverage? What are your wishes for your children’s care? Do you need to name a guardian for your children? A properly drafted will is the simplest way to make your wishes known and ensure that there is a clear plan for carrying them out in the event of your death.
3. Set Directives
A good estate plan involves accounting for what might happen before you’re gone. A medical care directive spells out your wishes for care if you’re incapacitated. Similarly, a durable financial power of attorney allows someone of your choosing to manage your financial affairs. You may also choose to limit the powers of your named representative.
4. Choose Beneficiaries
Investment accounts, retirement accounts, and insurance products require you to designate to whom you wish your assets to go and in what proportion. It’s critical to keep these beneficiary designations current, as they supersede what’s in your will.
5. Be Aware of Your State’s Laws
Estate planning is almost always viewed as a sort of federal exercise — something we engage in to ensure that we don’t pay too much tax at the national level. But only very large estates are subject to federal estate tax. By contrast, several states levy taxes on smaller estates and even on those who inherit assets.
6. Get Professional Help
Generally, it’s worthwhile to consult a good estate attorney and a tax advisor. As your estate grows and your situation becomes more complex, they can be invaluable when the need to adjust your plan arises. Your First Command Financial Advisor may be able to recommend a local estate planning attorney who can meet your needs. Here are a list of questions to bring with you on that first visit
7. Review Your Plan Regularly
Once the heavy lifting is done, you’ll want to review your plan with some regularity. As your circumstances change — the addition of a new baby, the loss of a loved one, a change in jobs, a spouse’s career transition, a growing inventory of assets — so should your plan. Even if your situation doesn’t change, estate laws do. That’s why it’s essential to periodically review your plan with your Advisor.
If you’re ready to get serious about estate planning, talk to your Financial Advisor about next steps
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