Essential Steps to Effective Estate Planning

Developing a well-structured estate plan can help protect your wealth, reduce your potential tax burden, and provide peace of mind for you and your family. This process requires thoughtful evaluation of your financial situation and long-term objectives, your assets and liabilities, and intended beneficiaries.

Key Takeaways

• Your estate planning journey should begin by identifying your personal values, legacy aspirations, and unique family or financial circumstances.
• An overview of all accounts, property, valuables, and debts can help you see the complete picture of your finances and streamline your planning process.
• Thoughtful estate planning not only protects your wealth and minimizes taxes but also provides clarity for you and your loved ones.

Pre-Planning

The first two steps are critical to getting started, and must happen before your plan is created.

Step 1: Identify Goals and Objectives

Start by reflecting deeply on your legacy and the values that matter most to you. Consider what portion of your assets you wish to leave to your children or other loved ones, and whether there are heirlooms, investments, or properties you hope to pass on. There may also be charitable organizations or causes that are important to you. If you own a business, you may need to establish a succession plan and think about ways to provide for governance, continued leadership, and, in some cases, protection of the business’s intellectual property.

No two estate plans are the same. By articulating your specific priorities at the outset, you can lay a solid foundation for the rest of the estate planning process.

Step 2: Take Inventory

Identifying what you own, what you owe, and where your assets are located can make it easier to allocate your wealth and address any gaps or areas needing attention. Organizing your financial records now can help avoid confusion later.

You should gather detailed information on each of your financial accounts, tangible assets, and outstanding debts, as well as any documentation related to real estate holdings.

Do not overlook life insurance policies, including those provided by an employer. Relevant information includes how each asset is owned, the nature of joint ownership, if any, and both primary and secondary beneficiary designations and designees for “payable on death” and “transfer on death” accounts.

Step 3: Create and Implement an Estate Plan

With your finances inventoried, it is time to decide how your assets will be distributed. This is where the professional guidance of financial advisors, tax professionals, and estate planning attorneys can be especially valuable.

Create a Will

A will outlines who receives your assets and names an executor or personal representative to carry out your wishes. It can also appoint a guardian for minor children. Regularly review and update your will to reflect life changes.

Name Beneficiaries

Designate who will inherit your assets, considering relationships and financial needs. Review primary and secondary or contingent beneficiary designations on insurance policies, retirement accounts, and bank/brokerage accounts to ensure they match your intentions, as these typically supersede your will.

Establish Directives

Create legal documents for healthcare and financial decisions if you become incapacitated, such as a living will, general durable and healthcare power of attorney, and declaration of a pre-need guardian.

Address Estate Taxes

Work with tax professionals to better understand federal and state estate tax laws. This can ultimately help minimize your estate’s tax liability.

Communicate with Your Family

Inform your family about your estate plan so they are aware of your intentions and can be ready to fulfill your wishes. Speak with your designated agents under your powers of attorney and help them understand what is required when the time comes.

Step 4: Revisit and Update Your Estate Plan as Needed

Estate planning is an ongoing process, so be sure to make the necessary adjustments as your life and circumstances change. Setting up a regular review cadence with your advisors can help keep your estate plan on track.

Glenmede Can Help You Preserve Your Legacy

Estate planning is a multifaceted process. Given the complexity involved, it is important to start early and seek professional guidance. For more than 65 years, Glenmede has served the best interests of our clients. We offer a personalized approach to estate planning that helps align your goals for preserving and transferring your wealth with your broader strategy.