Estate planning checklist: 7 key steps to making a successful plan

It can be easy to overlook, but an estate plan is essential for nearly everyone, whether you have a lot of money or just a little. An estate plan tells your heirs and the courts how to divide up your assets, but it also helps protect your loved ones from unnecessary hassle and expense – as well as potentially months, even years, tied up in the court system settling your estate.

“Constructing a strong estate plan can be very beneficial to you and your loved ones and will help minimize the probate process, expenses, delays, and loss of privacy,” says Brett Gersack, a wealth advisor at Halbert Hargrove in Bellevue, Washington. “If done properly, the estate plan can help significantly reduce the amount of tax and fees the estate owes at death.”

A solid estate plan can be relatively straightforward to establish, and in some cases, you can also set one up with relatively little cost. Here are the things you need in an estate plan including  one element that can provide more flexibility and help settle your estate more quickly.

7-step checklist for estate planning

Here are seven items you’ll want to carefully consider as you’re making your estate plan.

Take inventory of all tangible and intangible assets

Estate planning involves enumerating all your tangible and intangible assets, not only physical property such as cars, furniture, paintings or sentimental heirlooms but financial accounts, too.

You need to think of everything you want taken care of when you’re no longer here, says Michael Landsberg, CPA, CFP, principal at Homrich Berg, a wealth manager in Atlanta.

It can be a good time to ensure that you have all your financial accounts well-documented for the executors of your estate, including accounts that may have been lost along the way. It can be easy for unused financial accounts to remain lost in the sands of time.

Make sure everything is spelled out to the best of your ability and that you’ve listed all your accounts. “You don’t want it to be a big scavenger hunt once you’re gone,” says Landsberg.

Ensure plans for your family are set

You’ll also need to consider how your family is taken care of after your passing and what you’ve asked them to do:

• Name guardians for minor children: While wills typically focus on what happens to financial assets, you’ll also want to specify what happens to any minor children on your passing, namely who takes care of them. “If you have an underage child, one of the most important steps in the estate plan is to name a guardian who will take care of them,” says Gersack. “Typically, the guardian of your child is also the conservator who will manage the child’s financial assets until they reach the age of majority, either 18 or 21 years old.” If you don’t want the state deciding, you’ll need to specify your wishes in the will.
• Establish life insurance: If your finances aren’t where they ought to be to support your surviving family, you may want to consider establishing life insurance. At a minimum, life insurance can help get your loved ones through a tough financial time in the immediate wake of your passing, but the right policy may also be able to set up your heirs well for a longer period.
• Ask potential executors: An executor carries out your will or trust, and it can be a tall task when the time comes. It involves distributing money in accordance with any legal documents and ensures that the estate is steered properly through the legal system. So you’ll want to be sure that you’ve named an executor or executors who are up to the task. That means you’ll need to speak with them and ensure that they’re willing and able to act.

Set up all legal directives

A good estate plan has at least three elements – a will, a power of attorney and an advance healthcare directive – and each serves a different purpose:

• Will: The will is the cornerstone of your estate plan, and it directs your assets to be distributed as you see fit. Everyone needs a will, even if it’s a simple one. If you do nothing else in planning your estate, at least create a will, so that you don’t die intestate and leave the decision to the courts. “The biggest mistake you can make is dying intestate,” says Landsberg. “It’s going to be expensive and time-consuming [for your heirs].” More complex estates will require an attorney, but the basics of a will are straightforward. In fact, some online resources will help you do it for free.
• Power of attorney: A power of attorney can give someone the ability to take care of your affairs while you’re still alive. A financial power of attorney can help if you’re incapacitated and are unable to manage your finances or pay your bills, for example. Meanwhile, a medical power of attorney can help a loved one take care of health care decisions on your behalf. Meanwhile, a health care power of attorney allows a person to make medical decisions if you’re unable to do so. “You can give a financial power of attorney as much or as little power over your financial affairs as you wish,” says Gersack. “It is important that when establishing this document that you have a conversation with your power of attorney so that if they are ever called upon, they have a good understanding of what they can and can’t do financially for you.”
• Advance healthcare directive: An advance healthcare directive clarifies to the medical community how you want them to handle your health-related decisions if you’re unable to consciously choose or communicate. For example, you can specify ahead of time whether to be resuscitated. “This is a legal document that will list out medical treatments you would and would not want,” says Gersack. “It is also used as a guide for your family to help them make decisions based on your wishes, about sustaining your quality of life, pain management, and end-of-life care.”

See if a trust works for you

A will, a power of attorney and an advance healthcare directive are minimum requirements for a solid estate plan, but you may need more, depending on your specific circumstances and how you want your last wishes to be carried out.

And here’s where a trust can help you out. While a trust may sound like the province of the very wealthy, it can actually be useful for those of more modest means. One expert suggests that those with an estimated estate of as little as $150,000 could benefit from the use of a trust.

A trust can help speed an estate through probate, minimizing hassles and time. They can also be used in addition to a will to direct your assets, whether they go to loved ones or are directed to a charitable legacy.

A trust also offers the ability to control how your money or assets will be distributed. That’s important if the beneficiary is a minor child or someone who cannot handle money properly.

There are various kinds of trusts, and each allows you to use the legal structure to carry out some objective. Certain trusts may allow you to minimize estate taxes and court fees, protect assets from creditors or from ex-spouses and keep your estate private by avoiding probate.

Trusts can be more complex than wills, and typically require the help of an attorney, especially if you have complicated requirements beyond a basic revocable trust. You’ll also want to consider how your will and a trust could work together to create an estate plan that’s easier for your heirs.

Consider whether you want to leave it all to your children

“Many young families simply give all their assets to their kids at passing,” says Gersack. “The problem with that strategy is, if the parents pass away when the kids are young, and they do not establish the proper trusts, the kids have access to all of the money when they reach the age of majority, either 18 or 21 years old. This might end up being a substantial amount of money for a young adult to inherit with no stipulations.”

“I tell my clients to really think about how much they want to give to their kids and at what age do they have access to the money if something were to happen to them,” says Gersack. “These are the types of questions they need to think really hard and long about to make sure their estate plan is exactly as they wished for.”

Assess applicable estate tax laws

As you’re planning your estate, you’ll need to understand how estate taxes factor into the mix.

Unless you’re among the wealthiest Americans, you likely won’t face any federal estate taxes. The estate tax exemption is $12.92 million for 2023, so any individual estates below that level are not subject to the tax. Even more useful, any unused portion of that amount may be passed on to the surviving spouse, who can then give away as much as $25.84 million tax-free.

But many states do impose an estate tax or inheritance tax, and they often do so at much lower amounts than at the federal level. As of 2022, 12 states and the District of Columbia levy an estate tax, while six states charge an inheritance tax. The tax rates and exemption amounts vary widely, so it’s important to carefully consider how these laws affect your estate plans.

Keep your estate plan up to date

So you’ve set up your estate plan and you’re good to go? Well, it’s worthwhile reviewing your plan from time to time. Landsberg suggests you should have a look every five years to be sure that everything is still how you intend it and that tax laws have not changed in the interim.

Your plan could be vastly out of date, depending on changes since you first drafted it.

“In reviewing a client’s power of attorney recently, we discovered that he had listed his ex-wife who he had been divorced from for over 20 years,” says Gersack. “He was very surprised she was still listed and immediately reviewed and updated all his estate plan documents with his attorney.”

Bottom line

It can be tough for some individuals to create an estate plan, because it forces them to think about their own mortality, which is not something most people have an easy time doing. But estate planning can also be a process where you show friends and family in your life how much you care about them and how you’ve remembered them with certain assets or objects. It’s also a way to ensure that your loved ones don’t have months of work handling your estate.

“Your estate planning documents are not for you, they’re for who is left behind,” says Landsberg.