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7 Vital Estate Planning Tips

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Estate planning is an essential financial process that determines how your assets will be protected, managed and distributed in the event that you become incapacitated or die. In 2023, only one in three Americans have an estate plan, but 25% told that inflation has made them see a greater necessity for estate planning. Here are seven vital tips to kickstart your estate plan. 

A financial advisor can help you create an estate plan to protect your assets and provide greater financial security for your family.

Why Is Estate Planning Important?

You may think that an estate plan is only used by wealthy people to pass on assets to their beneficiaries. But it is also a strategic tool that can help preserve your assets and limit liabilities for yourself and your family. 

Yes, the cornerstone of your estate plan will revolve around the creation of a will, which is a legal document that can instruct how you want your property or the custody of a dependent (if any) managed after your death. 

But an estate plan can also involve setting up a trust to minimize taxes and probate costs that are associated with the transfer of an inheritance. 

Other estate planning services include establishing guardians, appointing beneficiaries, scheduling charitable gifts and making end-of-life decisions – like entrusting someone with a financial or medical power of attorney, naming an executor for your will and preparing for your funeral.

Alternatively, if you die without an estate plan, and specifically a will, a probate court in your state could intervene to determine what happens to your property. In the case of children, a family court could decide who gets custody.

7 Tips to Kickstart Your Estate Plan

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  1. Itemize physical assets: These include all forms of physical property and those with an objective market value like cash, real estate, vehicles and investments.
  2. Document intangible property: These could be patents and patent applications, trade names and trademarks, service marks and copyrights. Take note that intangible property could be difficult to value, but you will still want to document it for your beneficiaries. 
  3. List all of your debts: While part of your estate planning involves safeguarding your assets, another important part is to list your debts, since your executor will need to pay them off to avoid eating into the inheritance of your beneficiaries.
  4. Review retirement accounts: The money that remains in your retirement account after you die can be transferred to a beneficiary. But keep in mind that the beneficiary who is designated on your retirement account will supersede your will. So make sure that all documentation is updated to match.
  5. Update life insurance: Just like with a retirement account, the person who is designated as a beneficiary in your life insurance contract will supersede anyone else who is listed on your will. So, once again, make sure that all documentation is updated.
  6. Appoint your beneficiaries: This is a critical step to ensure that your assets are distributed according to your wishes. Beneficiaries are individuals or entities who will inherit your assets. Review and update them periodically, particularly after significant life changes like marriages, divorces, births or deaths. 
  7. Draft an official will: This legally binding document will not only provide clarity, but it will also minimize potential conflicts among loved ones. For complex estates or specific legal concerns, make sure to consult an estate planning attorney to ensure that your will complies with local laws and regulations.

Bottom Line

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Creating a comprehensive estate plan is a crucial step toward securing the future of your family and preserving your legacy. Estate planning services generally include creating a will to preserve and distribute property, establishing a trust to minimize taxes and probate costs, and making other end-of-life decisions.

Tips for Estate Planning

  • A financial advisor can help you tailor an estate plan to maximize tax-efficiency and avoid costly errors. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • If you have a sizable estate, estate taxes at the state and federal levels could be hefty. One way to maximize inheritance for your beneficiaries is to gift portions of your estate in advance to them, or even set up a trust.

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