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This article discusses Estate Planning Basics - An In-Depth Guide, including:

  • Why Do I Need An Estate Plan?
  • The Ultimate Checklist for Estate Planning; and
  • Checklist for Estate Plan Updates  

This article discusses Estate Planning Basics - An In-Depth Guide, including:

  • Why Do I Need An Estate Plan?
  • The Ultimate Checklist for Estate Planning; and
  • Checklist for Estate Plan Updates  

An estate planning checklist is a good place to start when creating a detailed and well-thought-out estate plan that will protect your heirs. It should also include what occurs in the case of an accident, including death and disability.  

Keep in mind that the primary purpose of estate planning is to protect you and your loved ones. You need an estate plan regardless of your age or wealth, and this thorough checklist will ensure that your estate plan is complete and up to date.  

Why Do I Need An Estate Plan?

A comprehensive estate plan entails much more than just drafting a will. For others, it entails taking measures to reduce estate taxes.   Fortunately, due to reforms in the tax code, only a small percentage of properties now owe federal estate taxes. The main goal of an estate plan, though, is to decide who will inherit your property after you die. Many people, however, don’t finish their estate plans because they don’t know where to start. They are intimidated by the many things that should be included in an estate plan. The aim of this estate planning checklist is to make the process as quick and straightforward as possible.  

And if you decide to entrust your estate planning to an attorney, you’ll need a basic understanding of what’s involved, and the attorney will most likely walk you through an estate planning checklist like this one to ensure your plan is thorough.  

The Estate Planning Checklist identifies and protects the people you care about.  

Since the ultimate aim of an estate plan is to provide for and protect loved ones, identifying the family and friends you intend to provide for and protect is a crucial first step in every estate plan. Make a list of any causes you’d like to support.  

The Ownership of Valuable Property and Sentimental Assets is Covered by an Estate Planning Checklist  

Not only should the estate plan cover major property assets, but it should also specify which heirs and beneficiaries should receive sentimental or emotional objects. Despite their low monetary value, these assets are often the source of bitter and long-lasting family feuds, so pay careful consideration to how they are distributed in an estate plan.  

The amount of an estate that goes through probate is often determined by an estate plan. Depending on your state, probate can be time-consuming and costly. There are ways to stop probate, and you should consider including some of them in your strategy. Some assets are exempt from probate and are not subject to the will’s power. Beneficiary identification forms should have been filed for these other assets so that they pass to the intended heir.  

Non-financial concerns such as minor children and medical treatment planning are included in the estate planning checklist.  

Non-financial concerns are also addressed in a comprehensive plan. If you have minor children, decide who will care for them if both you and their other parent die.  

Determine who will be responsible for your treatment and wealth management if you are unable to do so due to sickness or injury. Using trusts and other strategies, you can secure your assets from your heirs or creditors.  

Leave instructions for your funeral services and arrangements to relieve your loved ones of the responsibility.  

The Legacy You Leave Is Affected by Your Estate Planning Checklist  

If you don’t have an estate plan, you may not be able to leave the legacy you want. With a well-crafted estate plan, you can relieve the survivors of major financial pressures and leave them financially stable. Follow the two estate planning checklists below to get started. The first list ensures that an estate plan includes all of the essential elements. The other list ensures that the estate plan remains current. Examine both on a regular basis to see if an estate plan needs to be updated.  

The Ultimate Checklist for Estate Planning:  

1) Take action!  

The most serious flaw in any estate plan is inaction, which is why I refer to this problem as item 1! If you don’t have even a simple will, your state will decide how your assets are distributed. The easiest way to avoid this is to complete your estate plan in stages by going through the checklist below. Begin by putting together a basic estate plan, which you can then refine and develop over time.  

2) Do you have a will that is up to date?  

Dying intestate, or without a will, means that a person has no control about who inherits his or her possessions. Instead, it is up to state rule to decide who gets what.  

If you die without a will, your friends, relatives other than immediate family, a domestic partner, charities, and your pets will receive nothing.  

If you have minor children, make sure your will names one or more guardians for them, as well as backup guardians, and documents your wishes for their care and financial support. Consider appointing guardians for your pets.  

Consider how you’d like to share assets that could trigger a rift among your heirs.  

When writing a will, make sure that all of your assets are listed and that your beneficiaries are clearly named. In addition, the will should appoint an executor and provide substitutes in the event that the executor dies or is unable to act as executor for any purpose. Ascertain that the executor is ready to serve. The document must also be signed in front of witnesses; the number of witnesses required varies by state.  

If you don’t employ an experienced estate planning attorney to help you write your will, you risk making mistakes that invalidate it.  

More on Wills: How to Write the Ideal Will for Your Estate Plan  

3) Gather all necessary documents.  

The following are important documents:  

Identification of the person: A birth certificate, passport, and marriage license are all necessary documents.  

Documents related to health care  

Authorization under HIPAA: Allows health-care services to inform selected family members of your medical condition.  

A living will (also known as an advanced health care directive)

Returns of income and other tax records  

Bank and investment account statements  

Insurance plans

Insurance plans  

Deeds and titles to real estate  

Certificates  

Proof of ownership of the asset  

Documents relating to marriage and divorce, as well as birth certificates  

Wills and testaments  

Power of Attorney  

Health Care Directive

Trust agreements

Accounts on social media  

Summaries of debt from loans, mortgages, credit cards, and other sources  

Bills that repeat themselves  

Divorce orders   

Titles of vehicles  

Documents and Forms for Estate Planning: What are the Estate Planning Documents and Forms You May Need, and Why Are They Important?  

Keep all of your records in a secure location and make sure your relatives, executor, and trustees know where to find them.  

4) Maintain a record of your assets and estate.  

Keep an up-to-date list of all assets and liabilities, as well as their locations. Be sure to update this list at least once a year and share it with your spouse and designated executor. Also, make a file with all of the records that support this list of assets and liabilities.  

Every asset, including homes, land, real estate, cars, collectibles, jewelry, artwork, personal belongings, bank accounts, stock, bond, and mutual fund investments, life insurance policies, retirement plans, health savings accounts, business ownership, and so on, should be taken into account.  

You should also think about digital assets, which is a rapidly changing sector. Begin by making a list of all of your digital properties, such as social media accounts, blogs, and email addresses. Access details such as the web address, user name, and password should be included on the list. Also, make a list of any automatic fees associated with these accounts so that an executor can make sure they’re paid or canceled.  

5) Do you have a health-care advance directive?  

If you become incapacitated and have not named someone to act as your medical power of attorney, a court will make decisions on your behalf. You’ll need an advance health care directive if you don’t want anyone you don’t know or trust to make health-care decisions for you.  

You name one or more persons (via a health care power of attorney) to guide your medical treatment if you are unable to do so yourself in an advance health care directive. Any instructions and expectations you have for your treatment and care can also be included in an advance health care directive to guide the agents when making decisions. For example, in the event you become chronically ill or are unable to express your wishes, an advance directive specifies what forms of life-prolonging medical care you do or do not want. You may also specify what you want to do to your remains, such as organ donation.  

If you do not nominate a health care agent, a court will usually appoint someone to make medical decisions on your behalf. If the condition is deemed an emergency, a doctor will make the decision.  

Consider the following qualifications when deciding who to name as your medical power of attorney: 

  • Must be well-known by you.  
  • When needed, must be available.  
  • Must be dependable.
  • Must be trustworthy.  
  • Must be able to explain your choices to your physician.  
  • Your agent should also be an ardent supporter of your wellbeing. They should be able to deal with opposing viewpoints from families, colleagues, and medical professionals.  

How to Make Health Care Directives Work (and Other Medical Document Resources)  

6) Think about getting a financial power of attorney.  

In the event of injury, consider a financial power of attorney that may work on your behalf in financial matters.  

7) Decide who will inherit your IRAs and other eligible retirement plans.  

These accounts are not subject to probate. They are immediately inherited by the people you appointed as beneficiaries. If you don’t appoint a beneficiary, the accounts would be inherited by the default beneficiary decided by the plan administrator’s policies. The beneficiary identification forms should be checked as part of the estate plan, and assets should be transferred to those that are entitled to obtain them.  

8) Considered avoiding probate by using a living trust or other approaches.  

Living trusts (also known as revocable living trusts) enable assets to transfer to the next generation of owners without going through probate. A living trust may be changed or revoked at any time while the individual is alive. Revocability may also be beneficial if incidents arise that cause the basis of your trust to change. A beneficiary, for example, may pass away, and relationships may change. You never know what the future has in store for you. A living trust’s versatility enables you to make adjustments as required. Carefully choose the trustee and successor trustees. Since they are versatile, skip probate, and help reduce federal estate taxes, a revocable living trust is usually considered the best option for managing the distribution of property upon death.  

To Probate or Not to Probate: More Probate Resources  

More on Trusts: Types of Trusts and Why They’re Used  

9) Have you transferred ownership of your properties to a living trust if you have one?  

Many people create living trusts but never pass legal ownership of their properties to the trusts. As a result, the trusts are useless. Funding the trust is the process of transferring assets to the trust. If you need assistance transferring legal title of assets to the trust, contact your estate planning attorney.  

If you don’t fund your trust, it won’t change how your assets are distributed after you die.  

Asset ownership is critical, either by passing ownership to your trust or by holding an asset as a joint tenant with rights of survivorship, which allows title to pass to a co-owner automatically.  

10) Use a qualified terminable interest property (QTIP) trust to leave property to your partner while restricting their right to leave it to others.  

The QTIP trust pays your surviving spouse’s income for life, as well as contributions from the trust’s principal when necessary to benefit the surviving spouse. After your spouse passes away, the trust’s remaining assets are distributed to the beneficiaries you appointed. The QTIP trust guarantees that your partner is financially supported for the rest of their live, and that any assets left in the trust are distributed to the people you specify. It’s particularly useful if either or both of the partners have children from a previous marriage or if you want to make sure the trust assets don’t go to a subsequent spouse or children.  

11) Does each spouse own sufficient assets in his or her own name to qualify for the lifetime estate and gift tax credit?  

Only families whose estates could be subject to the federal estate tax should be concerned about this. Often, make sure the estate plan fully utilizes the marital deduction (although this has become less important under the latest tax law). If you are wealthy, you can take advantage of the marital allowance to avoid paying the federal estate tax on the majority of your assets.  

12) Determine the amount of life insurance you need and the appropriate form of coverage.  

Life insurance is often used to cover inheritance taxes, although it may also be used for a variety of other purposes. In the case of death or injury, life insurance may be used to pay off debts or other expenses. If you own a small business or invest in real estate, life insurance may be necessary. It can also be used to distribute inheritances evenly among family members, make a charitable bequest, or guarantee a minimum inheritance.  

Additional Life Insurance Resources: How Much Life Insurance Do You Need?  

13) Think of transferring a life insurance policy from your name to an irrevocable trust, agreement, or beneficiary.  

When the estate is likely to be subject to federal estate taxes, the life insurance should probably be owned by a trust or other company so that the benefits aren’t taxed. You will also want to make sure the insurance avoids probate or is handled and distributed according to your desires over time.  

Lifetime Gifts

14) Do you make use of the annual gift tax exclusion under your financial constraints?  

This allows you to pass money out of your estate without incurring gift taxes or having to use a portion of your lifetime estate and gift tax exemption.  

15) Do you gift property that will appreciate in value in the future as an annual gift?  

That way, potential appreciation will be kept out of your estate and won’t deplete your exempt number.  

16) Have you considered using your lifetime estate and gift tax exemption by making gifts in excess of the annual tax-free amount?  

As a result, you’d be able to take advantage of the exemption while it’s still available. After 2024, it will be reduced.  

17) Have you considered giving directly to your grandchildren, either now or in your will, to save their parents’ estate tax?  

If you’re extremely wealthy, generation-skipping gifts will help you stop paying estate and gift taxes. The gifts are subject to the generation-skipping tax over a certain amount, but they are well worth considering up to the amount that is excluded from the generation-skipping tax.  

18) Have you considered making charitable gifts with your IRA, other eligible retirement account, or Charitable Trust if you make charitable gifts in your will?  

This is frequently the most cost-effective method of making charitable contributions.  

19) Make a final budgeting document.  

You estimate the costs that will be caused by your death or that will continue after your death until the estate is settled. Then, as part of the estate strategy, you make sure that the estate has enough money to cover these costs.  

20) Leave instructions for the executor and family in the form of letters.  

This is a guide that gives your executor and family the details they need to find all of your bank statements, insurance plans, credit cards, auto loans, and mortgages.  

This letter should include the names and addresses of family and friends who should be notified that you have passed away. The letter may also specify where your belongings are kept, as well as your wishes for death, cremation, funeral services, and organ donation.  

Also, take advantage of this time to update your family, executor, and trustees on your overall estate plan.  

21) Have you sent your executor and loved ones a book of directions, checklists, and documents?  

These documents make life easier for your loved ones while also ensuring that your objectives are accomplished.

22) Make a plan to reassess – Checklist for Estate Plan Updates  

If any of the following things have changed since your last estate planning strategy analysis, it’s time to contact your estate planning advisor and update the plan:

  • Your or any of your family members’ marital status  
  • Any children or grandchildren’s births or adoptions  
  • You or a family member suffers from a severe illness or disability.  
  • Changes in the amount of help given to parents, children, in-laws, or others  
  • Any family member’s new financial issues  
  • Gifts to family members that aren’t included in your budget  
  • Loans to family members who aren’t included in your plan, whether given or forgiven.  
  • The amount of life insurance issued or the insurance beneficiaries  
  • Any aspect of owning a company, including valuations, revenues, and new projects  
  • Other than what was expected in the previous strategy, the net value of your estate  
  • You want to make changes to some of the following aspects of your will:  
  • Guardian Executor  
  • Bequeathed specific property  
  • Donations to charity  
  • Beneficiaries, trustees, and land ownership are also part of the trust arrangements.  
  • Even if it’s within the same state, moving or spending more time in a second home are also viable options.  
  • Your selection of beneficiaries or objectives for the disposal of all of your assets  
  • Any beneficiaries, including relatives and friends, who may have died
  • Has your business’s succession strategy changed?  

A comprehensive estate plan entails much more than just drafting a will. Since they don’t know where to start, many people don’t finish or even start their estate plans. They are intimidated by the numerous things that should be included in a plan.

Request a consultation with an Illinois Attorney. Call our office at (630) 324-6666 or schedule a consultation with one of our experienced lawyers today. You can also fill out our confidential contact form and we will get back to you shortly.

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