Estate Planning How To Guide

Estate Planning How to Guide

Estate Planning How to Guide

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What is Estate Planning?

Before you begin the estate planning process, you should first understand what estate planning is and what you can accomplish with it. Estate planning is the process by which an individual or a family arranges the transfer of assets in advance of death. Typically an estate plan attempts to preserve as much wealth as possible for the beneficiaries included in the estate plan. A complete estate plan, can do more than just plan for how your assets are handled when you pass. Estate planning can also allow you to plan for the care of others if you or a spouse should pass prior to your children reaching adulthood. Additionally, estate planning allows you to define the type of care you would like to receive ahead of time in case a situation arises where you are unable to communicate those wishes for yourself.

An overview of some of the benefits of estate planning or having an estate plan include:

  • The minimization of taxes, court costs, and legal fees
  • The naming of an executor to handle the affairs of your estate
  • The naming of a guardian for the care of any non-adult children or children with special needs
  • Instructions for your care and financial affairs, should you become incapacitated before death
  • The possibility of avoiding probate
  • The ability to keep your estate matters private as opposed to publicly assessable
  • Specifying how and to whom your assets will be distributed

Generally, when a person passes without a will or trust, their money and property are distributed according to laws of the state that they resided in. This court process is referred to as probate. The state will determine who gets the property based on their relationship to the decedent (person who passed). Some property, such as insurance policy proceeds, joint bank accounts and retirement accounts (such as IRAs and 401Ks) may be distributed to the person you designated as the beneficiary of that specific account. In the case that it is a joint account, the other person on the account with you is typically granted full control over that account and the balance of the assets held within it when you pass.

One way you can control the distribution of your property after death is by utilizing a will. Even though a will can provide for information on how to distribute your assets, a named executor will likely still need to go through a probate court process to distribute your property. If you would like to avoid probate, speaking to an estate planning attorney about creating a living trust may be your best option.

What is probate?

Probate is a state court administered process that transfers the estate of a deceased individual to named or remaining heirs. An estate is made up of the decedent’s real estate, personal property, life insurance, bank accounts, investments and personal belongings.

In probate court, an executor (if there is a will) or an administrator (if there is no will) is appointed by the court as a representative to collect the assets, settle any outstanding debts and then distribute any of the decedents (the person who passed) remaining assets to the beneficiaries. All matters of probate are reviewed by the state court. Each state has their own probate laws that dictate how the affairs of an estate are to be handled. Depending on the state (where the decedent resided), area and the complexity of the estate; probate can take anywhere for seven months to multiple years to complete.

There are seven typical stages in the probate process:

  • Stage 1– Filing a petition in probate court and having probate initiated
  • Stage 2 – Issuing notices to heirs and creditors
  • Stage 3 – First probate hearing occurs and the proving of the will
  • Stage 4 – Collection of the decedents assets / estate assets
  • Stage 5 – Paying of creditor claims
  • Stage 6 –The filing of taxes for the estate
  • Stage 7 –Probate court closes the estate and any remaining assets are distributed to the heirs of the estate

Where to begin your estate planning?

Estate planning can seem like an overwhelming process at first, but with the assistance of an experienced estate planning professional it can be greatly simplified. We highly encourage you to reach out to an estate planning attorney in your area who can help guide you through the process and give you personalized recommendations on what might be best for you, your estate and family. The following information will give you a head start on the process. The following estate planning guide breaks estate planning into 10 key steps.

Step 1: Make a complete inventory of your estate

To start, you are going to want to make a complete inventory of all of your assets. Begin by creating a list to document your personal effects, insurance policies, investments, bank accounts, automobiles, real estate and business interests. You can find a sample of an estate planning inventory spreadsheet in the tools section of our website located here.

For personal effects such as jewelry, furniture, heirlooms, collections…. we suggest including an item description, item location, estimated item value, and the name of the beneficiary(s) that you would like to transfer to item to at the time of your passing.

For bank accounts, investment accounts, retirement funds, insurance policies… We suggest documenting the financial institutions name, address, representative you work with (if any), phone number, account / policy number, account type, balance and in what portions you would like to have these assets distributed to your beneficiaries.

For motor vehicles such as cars, boats, farm equipment, RVs…. and or real estate such as your primary residence, a second home, land…. we suggest documenting the address, how title is held, the purchase price, the estimate current value and how you would like the assets to be distributed to your beneficiaries.

We realize that taking a complete inventory of all of your property can be time consuming. You may be surprised by how much you have accumulated over the years. Consider that creating a complete inventory may help prevent family disagreements after your passing. If everyone has a clear understanding of your wishes for each item, there may be less misunderstanding. We encourage you to be as thorough as possible and go through the inside and outside of your home(s). Add all items of real or sentimental value to your estate inventory.

Step 2: Create a list of your liabilities

Much like creating an inventory of all of your possessions is important, creating a list of all of your debt / liabilities is important as well.  When a person passes, any debts they had when they were living will need to be paid. Without a living trust, an estate will likely enter probate and debts / liabilities will be settled at that time. If you have a trust and your estate is able to avoid probate, the executor of the trust / estate will still need to pay-off your debt or settle with creditors. Having a list of liabilities created in advance will make the process far easier for whomever is handling those aspects of your estate.

Much like with the estate inventory assets list you created, you should be as detailed as possible with your estate liabilities. You will want to list items such as credit cards, personal loans, auto loans, judgements and real estate mortgages. On your list you will want to include information such as the creditor name, contact person (if any), phone number, address, account number and the amount of outstanding debt. Any supporting documentation for the debt, such as a mortgage note or contract should also be included / kept with your list of liabilities. You may also want to include information for your home utilities, to simplify the maintenance of your home during the probate / distribution process.

Step 3: Review your account details

As you do your estate planning, it is important to make sure that everything is in accordance with your wishes. Many retirement accounts, investments and insurance policies allow you to designate beneficiaries in their web portals. Specifying a beneficiary in their system can circumvent your will or other estate planning documents. For this reason it is important for you to make sure that all of the information in their systems matches what you have stated in your estate planning documents.

Step 4: Seek professional guidance

Depending on your family situation, the amount / type of assets you own and your directives for finances and health care, estate planning can get pretty complicated. At this point of the estate planning process, it likely make sense to seek the assistance of an estate planning professional such as an estate planning lawyer. In the US, each state decides how it handles estate and probate matters. For that reason you will want to find an estate planning lawyer or service familiar with the laws of the state you reside in.  A good estate planning professional will be able to give you guidance on all aspects of your estate planning needs. Some examples may be if a last will and testament or a living trust makes sense for your situation, should you have powers of attorney drafted, or how long the probate process may take in your area. They will be able to assist you with creating a Power of Attorney for different situation such as Medical or Financial related matters. They can rely on their experience and education to give you advice on planning for the guardianship of children or family members with special needs. They can also help you avoid costly mistakes when it comes to transferring assets to your beneficiaries.

So what is the best way to find a capable and qualified estate planning professional? Some of this comes down to preference. For instance, some people feel more comfortable working with a local estate planning professional that they can meet in person. For others, cost or experience may be more important than location. Whatever your preference may be, there are resources available to help you select a qualified estate planning professional. One of these resources is the estate planning section of Here you can select the state, then city you want to search in. Their site will provide you with a list of estate planning lawyers in the specified area. You can view reviews from clients they have worked with, their practice areas and education. We also suggest you search your State Bar website if available. For instance, the California State Bar website allows you to search for an attorney and find out their current status and if they have had any disciplinary action taken against them. These are just two of many online resources that are available to you and can assist you in finding a qualified estate planning professional. If you do not have the financial resources available to afford an estate planning lawyer, there are also low cost online services available that can help you draft a will, power of attorney and even a living trust; all for a fraction of the cost.

Step 5: Determine if a will or trust is best for you

At this point you are going to want to determine if it makes more sense for you to utilize a potentially simple last will and testament or a more elaborate estate planning tool such as a revocable living trust. Let’s begin by understanding the difference between the two.

A will or last will and testament, is a legal document that provides instructions for what should happen to a person’s assets after his or her death. The term “last will and testament” is commonly used to mean the same thing as a “will”, but to be exact, a last will and testament refers to the most recent version of a will. A will is commonly used to distribute a personal property, real estate and investments. It may also be used to appoint legal guardians for minors or people with special needs. If a person dies without a will, they are said to be intestate, and state intestacy laws govern the distribution of the property of the decedent (person who passed).

A trust or living trust, is a legal arrangement that allows a person’s assets to be held and managed by a third party. This third party is known as a Trustee. The Trustee is the person or group of people that are responsible for ensuring that the estate is handled in the manner specified in the trust documents. There are several purposes for an estate planning living trust, but one of the more common reasons people choose to use a living trust is to make sure their assets are distributed how they wish and to avoid the need for probate.

Deciding on utilizing a trust or will for your estate planning needs typically boils down to a few different things. With a trust, the information about your estate stays private and confidential. When a will is used, information about your estate is made public during the probate process. Another factor is cost. A living trust is typically more expensive to setup and maintain over time than a will. A will can be created very inexpensively and even potentially at no cost. You can find samples of wills online with the help of online resources (just make sure the will meets the minimum requirements of your state to be deemed valid in court). Lastly, depending on the state you reside in, if you have very few assets, a will may be sufficient to avoid the probate process.  A capable estate planning lawyer can help you decide what the best option for your situation is.

Step 6: Designate a reliable estate executor, trustee or administrator

You may be wondering, what is the difference between an estate executor and an estate administrator? If a person dies leaving a valid will (a valid will, is a will that is verified as valid by the court during probate) and the decedent had named a person to administer the estate, that person is referred to as an executor. If a person passes with no will, a will that cannot be validated during probate, or if the decedent did not name a person to administer the will, the person the court appoints to administer the estate is referred to as an administrator. In the situation where the decedent had utilized a living trust for their estate planning needs, a trustee is a person given control or powers of administration of property in trust with a legal obligation to administer it solely for the purposes specified. So when it comes time for your estate to enter probate or for your trust to be administered, you will want to make sure that you have a capable executor, administrator or trustee available to carry out the process.

The naming of an executor is one of the most important purposes of a will. The executor is the one to carry out the final wishes of the decedent as specified in the will. For this reason, it is important to choose someone whom you trust and is competent to handle such an important and potentially difficult task.  The executor of an estate must be at least 18 years old and mentally sound enough that the court will be comfortable letting them handle the estate affairs. A court can remove an executor for committing fraud, embezzlement or for the misadministration of as estate.  For this reason, it is suggested that you choose someone who is honest, trustworthy and if possible respected by the beneficiaries named in your will or trust. We recommend that before selecting your estate executor, you speak with them. Make sure that they are willing to serve as your executor and that they understand how you would like the different aspects of your estate carried out.

Step 7: Establish your directives and power of attorney documents

As mentioned earlier in this estate planning guide, a comprehensive estate plan accounts for more than just how your assets will be distributed upon your passing. Advance health care directives are legal documents that provide guidance to your family, and medical providers regarding your health care when you are incapable of communicating this information yourself. For instance, if you are physically or mentally incapacitated, an advanced health care directive can specify your wishes regarding the medical care you would or would not want to receive in different situations. An advance healthcare directive may also communicate additional medical preferences such as if you wish to be an organ donor or wish to donate your body to medical science. Commonly, a medical power of attorney or health care agent form is used in conjunction with an advance health care directive. A medical power of attorney is a legal document that allows you to appoint a person to make healthcare / medical decisions on your behalf in the event that you are unable to make them for yourself.

In addition to having a person to make difficult medical decision on your behalf, you should also consider having someone to make financial decisions on your behalf as well. In estate planning, you can utilize a power of attorney to authorize a person of your choosing to handle financial matters on your behalf if you become incapacitated. A power of attorney has some flexibility. For instance, you can design a power of attorney to become active only in the situation that you are incapacitated. You may also choose to create a power of attorney that goes into effective immediately if you are in the early stages of a degenerative disease. A power of attorney only applies to the specific powers you authorize in the document and it is only valid during your lifetime. The rules governing directives and power or attorney documents change from state to state. We encourage you to have a conversation with an estate planning expert that is familiar with the laws of your state to determine what the best options for your personal situation are.

Step 8: Designate your beneficiaries

Selecting the family members or loved ones who will receive your property upon your passing is one of the most personal and important acts carried out by a will or trust. To do so, you will need to designate your beneficiaries and specify what property they will receive in your will or trust.  A beneficiary is a person who will receive the benefit of personal or real property from a trust or estate on behalf of a benefactor (decedent) or settlor (the person who created the trust). For example, the beneficiary of a life insurance policy is the person who receives the payment of the amount of insurance after the death of the insured. If you are drafting your own will, you should be as detailed as possible when naming your beneficiaries. Do your best to provide a person’s full legal name, date of birth (if available), address, phone number and their relationship to you (brother, spouse, child, friend…). The more complete your information is, the more likely your property is to be distributed as you desire and the easier the task will be for your estate executor or administrator.

If a charity is important to you, you can also designate that charity as a beneficiary in your will or trust. What can you donate to a charity in your will? Most commonly money is left to a charitable organization since it makes it easier for the charity to accept the donation, but many will accept other forms of donation such as stocks, bonds, real estate or even a vehicle. Once again, be as thorough as possible when it comes to detailing the information about the charitable beneficiary. Try to list their full name, street address, phone number and Employer Identification Number (if available).

Step 9: Keep your estate planning documents in a safe place and share them with your estate executor

Even the best drafted will is useless if it is lost or destroyed. For this reason, once you have completed the creation of your will and estate planning documents, you should protect them and share copies with important individuals. The original, non-copy version of the will that contains the pen signed signature (sometimes called the wet signature) is the most important. The “original” is the version of the will that is validated during probate. If the original is not being maintained at your attorney’s office, you should consider keeping it in a safe place at home. If you choose to keep it in a fireproof safe, you will want to make sure that your estate executor and / or spouse have the ability to gain access to the safe and are aware of where it is being kept. You will want to provide a copy of the will and estate planning documents to your designated estate executor so that this copy can be verified and to serve as a backup in case the original is destroyed.

Step 10: Review your estate plan annually and update as needed

The world in constantly changing and the information in your estate planning documents can quickly become outdated. We recommend reviewing your estate planning information each year and making modifications to it when needed.  In addition to regular reviews, it’s a good idea to update your plan when significant changes or life events occur. Here are some examples:

  • Marriage, divorce or the passing of a spouse
  • Purchasing a home or other significant asset
  • Paying off a mortgage or significant debt
  • The birth or adoption of a new child
  • When a grandchild is born or new potential beneficiary enters your life
  • When a child becomes an adult
  • Death or change in circumstances of the guardian named in your will
  • Borrowing a large amount of money or taking on a significant liability
  • Significant changes in the value of an asset
  • The death or change of your executor, trustee or successor trustee

Keep in mind that the more up-to-date your estate planning documents are kept, the easier it will be for your estate to be administered. We hope that you found our estate planning guide useful. As we have mentioned, we highly recommend that you seek the assistance of an estate planning professional in your area to help you create or review your estate planning documents. We have also included a list of some online resources that you may find helpful in developing your estate plan and an estate planning glossary in case you need clarification on any terms.