An Essential Guide to Estate Planning Preparedness

Insights from experienced financial professionals.

A recent survey by Caring.com found that a whopping two in three American adults do not have an estate plan¹—an alarming statistic, considering that an estate plan can protect your assets and ensure that they go to the right people. If you have not begun to prepare an estate plan, or if your estate planning efforts have stalled, what can you do to get back on track? Here are seven crucial steps to take when planning your estate.

#1: Inventory Your Possessions

To learn how your assets should be distributed, you will first need to know what your assets are. Take a notebook and go through the inside and outside of your home, listing any valuable items like electronics, vehicles, jewelry, art or antiques, precious metals, lawn and garden equipment, and tools.

#2: List Your Non-Physical Assets

Once you have listed your physical assets, make a list of non-physical assets—401(k) and IRA accounts, checking and savings accounts, life insurance policies, brokerage accounts, cryptocurrency, and anything else that exists online. Having this list of accounts will make it much easier for the executor of your estate to track down non-physical possessions.

#3: Identify and List Debts

If you make a list of all your open credit cards, mortgage or HELOC, auto loans, and any other debt you are carrying, you will also allow your executor to easily ensure that your bills are timely paid after your death. To be most helpful, include your account numbers and any contact information for those holding your debts. And if it has been more than a year since you last requested your free annual credit report, downloading this report can help you identify any debts you have forgotten about or clear up any invalid entries. 

Once you have completed these lists, make at least two copies and keep them in a safe place. The key is for these lists to be easily accessible when needed. 

#4: Update Insurance Policies 

If it has been a few years since you've reviewed your auto, homeowner, renter, or other insurance policies, you may not be carrying enough coverage to fully protect you if the worst happens. Review your coverage limits and talk to your financial professional to see whether you should be carrying more insurance.

#5: Designate "Transfer on Death" Accounts

Some accounts can pass outside the probate process through a "transfer on death" (TOD) designation. For TOD accounts, as soon as one account-holder dies, the account is transferred to the named beneficiary. Allowing your beneficiaries to receive assets without having to go through probate can often provide a much-needed financial boost during a time of grief. 

#6: Choose Executor or Estate Administrator

It is important to select a responsible, detail-oriented person to serve as the administrator of your estate. This can be a relative or a third party, like a lawyer, bank employee, or financial professional. Your estate administrator will be responsible for inventorying and identifying your assets, paying off any debts, and distributing the remaining assets to heirs. 

#7: Get Documents in Order: A Will, Power of Attorney, Healthcare Proxy, and Guardianship

Much of the estate planning process hinges on having the right documents in place:

• A will, which designates the distribution of assets and can name guardians for any minor children or pets; and
• A financial professional and/or medical power of attorney, which can allow a named designee to make financial or healthcare decisions on your behalf.

These documents provide a roadmap for your estate plan and are the best way to legally ensure that your wishes will be carried out. 

 

 

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^Footnote

^{1 67 percent of Americans have no estate plan, survey finds. Here’s how to get started, CNBC, https://www.cnbc.com/2022/04/11/67percent-of-americans-have-no-estate-plan-heres-how-to-get-started-on-one.html}