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estate planning checklist

Thinking about your own death isn’t fun, but don’t worry, planning for your estate does not actually have to be a difficult or lengthy process. Unless you have significant assets or complex wishes, making your estate plan can actually be very straightforward. Here are the five steps you should take to make sure that you have a competent and complete estate plan. For help with estate planning and other financial planning questions, consider working with a financial advisor.

Step One: Establish Guardianship

If you have children or adult dependents, the single most important step in estate planning is to establish who will care for them if you die.

This is something that most parents do shortly (if not immediately) after the birth of their children, but it’s important to make sure you review these plans periodically. For example, many parents will name their own parents as guardians in case of death or disability. This may work fine when you’re 25 and your parents are 55, but may no longer be viable 10 or 15 years later.

Step Two: Evaluate Your Assets

estate planning checklist

Estate planning is about making sure that your loved ones are taken care of after you die and that your assets are distributed according to your wishes. If you have spent a lifetime building up strong finances and building a beautiful home, you wouldn’t want it all just seized by the government due to intestacy.

So Step One in estate planning is to take an inventory of your major assets. This doesn’t need to be detailed. Basically, you want to take stock of:

  • Major assets such as real estate, vehicles, art and other particularly valuable property. In most cases, this will be anything you own that has documentation such as a deed or title papers;
  • Cash assets, meaning the majority of your financial and investment accounts;
  • Income generating assets, meaning anything that creates revenue such as a business, rental properties or intellectual property;
  • Otherwise valuable assets, meaning anything else that has particularly important sentimental or financial value;
  • Otherwise essential assets, meaning anything that a friend or family member depends on.

In sum, these are the assets that you want to make sure are distributed according to your wishes. This inventory should represent everything that is either high-value or important to you and your loved ones.

The rest of your assets, from furniture and books to assorted cash holdings, is considered “miscellaneous property.” You don’t need to specifically account for miscellaneous property.

Step Three: Ensure Shared Ownership Where Appropriate

In some cases you will want to make sure that your property never enters the probate system. Doing so can protect assets from debt collectors, prevent legal challenges to a will, and make sure that someone’s use and access to property continues uninterrupted. This is most common in the case of marriage.

If you are married, in most cases you won’t want your property to pass by inheritance to your spouse. You will want to make sure that they simply continue to own all of the household’s assets in their own name regardless of what happens to you. (This is not universal, of course. For example, if you have a family trust, you may not want them to take ownership. However, most households will want to fully share assets.)

To do this, you need to make sure that you and your spouse share everything as joint marital assets. As long as that’s the case, you don’t need to specify that your spouse will inherit. They will not have to go through a probate process or need a will to receive property that you had formerly shared, since it will belong to them already.

This is also frequently the case when it comes to shared family assets. For example, if you and your siblings share a piece of real estate or a family business. If one person legally owns this asset but simply shares it with everyone else, or if everyone owns their own joint share then inheritance laws will kick in after death. To avoid this you need to make sure that everyone co-owns the assets in question, so there are no questions of ownership or shares of ownership.

The process for establishing shared ownership differs on a state-by-state basis. Regardless of which assets you would like to share, and with whom, consult with a lawyer about your local laws.

Step Four: Write a Will and Pay Debts

Aside from establishing guardianship, a last will and testament mainly accomplishes two things. First, it settles any and all outstanding debts. Second, it distributes any and all assets that you had at the time of your death.

For most households, this will does not have to be complicated. Unless you have particularly complicated financial affairs, or particularly complicated wishes, your will generally only needs to say a few things.

First, make it clear how you would like your debts to be paid. Most people will use insurance policies, the cash in their bank accounts or securities to do this, so your will may simply say something like this: “Use the proceeds of these accounts to pay any and all debts outstanding at the time of my death.” If your estate is large enough to trigger estate taxes, you should also name the accounts you would like used to pay those taxes.

Specifying how you would like this done makes sure that no one reaches for other assets. For example, unless you’re clear, you create the risk that someone will take possession of your cash, leading creditors to take and then sell your house.

Second, state how you would like your major assets distributed. In most cases, this is a simple distribution among key family members and friends. Typically the best way to do this is:

  • First, name any specific property you would like to go to specific people. For example, does anything have particular emotional significance to a friend or family member? Is there any property that you specifically want someone to have? Or is there anyone who you particularly want to see cared for?
  • Second, name any heirs for property that you cannot divide or do not want to divide. For example, it’s generally not worth naming multiple owners of a vehicle, so if you have a car, it’s usually best to either sell it or give it to one person.
  • Third, name any property you would like held jointly. For example, you might leave your home in equal shares to each of your children rather than risk having them sell it off.
  • Finally, name specific heirs to divide up the remainder of your estate either in equal portions or “as they see fit.” To prevent any potential conflicts, it is often best to specify “in equal portions.”

It’s important to remember that you must specifically distribute any property that you don’t want sold. A will is based on value. When you name property, the heir receives that property intact (assuming that it doesn’t have to be sold to pay any outstanding debts). However, when your heirs divide up the remainder of your estate, they do so based on its financial value. If they can’t decide who gets what, any property you have will get sold and the proceeds will be divided up among them.

Fifth: Consult an Attorney and Determine an Executor

estate planning checklist

Once you know how you want your estate handled, the final step is to consult with a lawyer to make sure that you meet all local laws and requirements. Then select an executor to enforce your will. This is extremely important. After your death, you will need someone to enforce your wishes. You also won’t be around to correct any mistakes. Do not leave this to chance. Spend a few hundred dollars to consult with an attorney and make sure that you did this right. Then put it all away in a drawer and do something more pleasant with your afternoon.

The Bottom Line

Estate planning is extremely important, but does not need to be complicated. Take care of any dependents and cover your debts, then name who you want to receive any important assets like a home or emotionally significant property. This is an extremely state-specific area of law, so be absolutely certain to consult with a lawyer to make sure you got everything right.

Estate Planning Tips

  • Writing a will is often the most complicated part of planning your estate. In our guide, we walk you through how to get started with writing your own will. While this won’t substitute for consulting an attorney, it will give you a great place to start the conversation.
  • If you have dependents, good estate planning is particularly essential — and a financial professional can help you. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

Photo credit: ©, © images, © Mitchell

Eric Reed Eric Reed is a freelance journalist who specializes in economics, policy and global issues, with substantial coverage of finance and personal finance. He has contributed to outlets including The Street, CNBC, Glassdoor and Consumer Reports. Eric’s work focuses on the human impact of abstract issues, emphasizing analytical journalism that helps readers more fully understand their world and their money. He has reported from more than a dozen countries, with datelines that include Sao Paolo, Brazil; Phnom Penh, Cambodia; and Athens, Greece. A former attorney, before becoming a journalist Eric worked in securities litigation and white collar criminal defense with a pro bono specialty in human trafficking issues. He graduated from the University of Michigan Law School and can be found any given Saturday in the fall cheering on his Wolverines.
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