One area many investors overlook is estate planning. Proper estate planning is an essential component of your financial plan because it can help your loved ones avoid a difficult and expensive process once you pass away. Here are four easy steps to help you plan for the distribution of your assets by creating and maintaining an estate plan that provides your heirs with financial confidence.
1. Make an Inventory
Before you can make a plan, you have to know exactly what you have. Take some time to document your holdings. This will include your home, other real estate you may own, vehicles, jewelry, and any other personal property that has monetary value. Make a list of your bank, brokerage, and retirement accounts, noting the funds held by each. Also document all insurance policies, and note their cash values and death benefits. It’s also important to list all your liabilities, such as mortgages and any lines of credit or other debt that needs to be resolved.
2. Conceptualize Your Plan
It’s always best to work with an experienced professional such as a financial planner or attorney. Be prepared for your first meeting by knowing the answers to these important questions:
a. If you become incapacitated or pass away, who do you want to manage your estate or its distribution?
b. Who do you select as your heir or heirs, and what do you want them to receive?
c. How would you care for your minor children, if applicable?
3. Create Your Plan
Your financial advisor or attorney will draft an estate plan that incorporates your information and is in accordance with state and federal law. Your plan will include a will that assigns how your assets will be distributed after you pass away, and will include powers of attorney documents that specify who will make financial and health decisions if you are unable.
You and your financial advisor or attorney should also conduct a professional review to make sure your paperwork is updated, and your investment account beneficiary designations properly identify your intentions.
4. Review and Modify Your Plan Periodically
Because circumstances change, your estate plan should be reviewed at least once a year as you acquire or divest assets, or as your beneficiaries increase or change. The key purpose is to make sure your estate plan truly reflects your intentions. You may purchase new property, or sell property you’ve owned, and as time goes by your family may be affected by births, deaths, marriages and divorces. Remember also that tax laws evolve and you may need to adjust your plan to accommodate these changes.
A good estate plan is likely to reassure you and your loved ones that the wealth you’ve gathered over the course of your lifetime will be properly distributed to support the people or organizations you feel deserve your final support.
We hope this article about estate planningwas informative. Synergy Financial Management can help with developing and managing your estate plan, and with a variety of other financial planning services. Please contact us so we can discuss ways to increase and protect your personal wealth, and enhance your retirement. Thank you!
Joseph M. Maas, CFA, CVA, ABAR, CM&AA, CFP®, ChFC, CLU®, MSFS, CCIM