Estate Planning Checklist, Basics & Costs

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Man and financial planner with papers working on estate plan (caption: Estate Planning Checklist, Basics & Costs)Estate planning sounds like something only rich people should do, but that’s not the case at all. You don’t have to own a ton of assets to consider estate planning, and there are many other elements to a comprehensive estate plan other than just making sure your assets pass on to your beneficiaries.

Our experts have compiled a beginner’s guide to help you determine everything you should be considering for you and your family’s future.

Article Overview

What Is Estate Planning?

At its most basic, estate planning involves designating who your assets will go to and who will handle your responsibilities upon your death or if you become unfit to make important decisions for yourself. But some estate plans include more comprehensive legal directives and documents that you can tailor to your needs and wishes.

An estate plan isn’t set in stone — you can always alter it as time or circumstances change throughout your life. But it’s important to develop a foundation for your loved ones just in case something unexpected happens to you.

Why Estate Planning Is Important

The main reason to prepare an estate plan is to protect your loved ones if something happens to you, but there are many important benefits, including:

  • Providing your spouse and children with financial support if you die
  • Ensuring that your assets get distributed to heirs of your choosing
  • Minimizing taxes (estate, gift, income, etc.) and other expenses
  • Ensuring that a person or people you choose can make important financial or medical decisions on your behalf if you become incapable
  • Supporting a charity or cause that’s important to you, if desired

Estate Planning Checklist: 4 Essentials You Need To Consider

So, where do you start with estate planning? Here’s a handy checklist for everything you need to consider to develop an estate plan. It can save you a lot of money to have this information on hand already if you choose to consult an attorney (which we recommend). See below for more information about where to get legal help with estate planning.

1. Evaluate Your Assets

Make sure you’re including any assets you have and the estimated value of each. You may want to consider getting tangible assets appraised if you want to make sure you’re distributing your inheritance equally among your beneficiaries.

Person finger on screen of online bank (caption: Best Online Banks For Savings)Here’s a list of assets you should include in your estate plan. You also want to consider any future assets you may acquire, such as an inheritance.

  • Real estate (homes, land, etc.)
  • Vehicles (cars, boats, motorcycles, etc.)
  • Collectibles (antiques, art, coins, etc.)
  • Other personal possessions (both financially and emotionally valuable)
  • Checking and savings accounts and CDs (certificates of deposit)
  • Investment accounts (stocks, bonds, mutual funds)
  • Retirement accounts
  • Life insurance policies
  • Health savings accounts
  • Business ownerships

Expert Tip

When you evaluate your assets, identify your beneficiaries carefully for each one, including all accounts where you can name a beneficiary.

We recommend revisiting your estate plan every five years, at a minimum, and after any major life change (marriage, new home, birth of a child, etc.).  Now may be the perfect time to reassess your beneficiary for a retirement account or a life insurance policy you set up years ago. It’s also important to name a contingent (back-up) beneficiary in case your primary one dies.

2. Consider Your Family’s Needs

Doctor reviewing life insurance policy (caption: Guide To Life Insurance Policies)One of the most important things you can do for your family is to make sure your spouse and/or children are taken care of upon your death. This can include getting a life insurance policy (if you don’t already have one) to provide for them financially, particularly if they rely on your income.

In your will, you’ll also want to name a guardian for your children to make sure the person you trust will be caring for your children if you die. You can also note your wishes and goals for how your children should be raised.

If you have beloved pets, you may also wish to name a guardian to look after them if you cannot.

3. Determine Your Other Objectives

There are other legal directives you’ll want to consider with estate planning.

Medical Care Directive

A medical care directive, also called a living will, lets you detail your medical care wishes if you become incapacitated. You can also designate a loved one with medical power of attorney, which gives that person the legal authority to make your health care decisions if you’re unable to do so. You can often combine both of these documents into what’s called an advance health care directive.

Power Of Attorney

Hand signing willYou can name someone as your power of attorney in the event you become incapable of making important decisions. This allows that person to make legal and financial decisions on your behalf, including paying bills, managing your assets, and more.

You can either choose durable power of attorney, which turns all of the decisions over to your designated appointee, or limited power of attorney, which places some limits on what that person can legally do on your behalf.

Trusts

Establishing a trust allows you to create a legal arrangement where some of your assets are set aside for a beneficiary. You designate a trustee to oversee the trust, and you can spell out how the trustee manages and distributes the assets in the trust.

Many people set up a trust so that the designated trustee begins to manage the trust assets once you die; however, you can set up a living trust where the trustee manages the assets while you’re still alive.

You’ll likely want to consult an estate attorney about establishing a trust. There are many different variables, purposes, and strategies involved that are individual to each person’s circumstances.

4. Examine Tax Implications

One of the major goals of estate planning is to maximize all of your assets that you’ll pass on to your beneficiaries. And part of the strategy comes down to minimizing taxes. This is one area where getting professional legal or tax advisor help can make a big difference, especially if your estate is large.

Federal Estate Tax

Taxes and papers on tableMost people don’t have to worry much about this because up to $11.7 million of an estate is exempt from federal taxation (this is the 2021 exemption, but it often increases each year).

However, there’s good news for spouses if you have a sizeable estate — a provision called the unlimited marital deduction. This allows a spouse to transfer any amount of assets to a surviving spouse free of federal tax.

If you have a large estate, the estate tax rate ranges from 18% to 40%. IRS Form 706 has many of the details you’ll need to know about which assets are taxable and how to determine their value and tax owed.

A professional estate attorney or certified tax advisor can help you develop a strategy to reduce or avoid estate taxes. Some common strategies include gifting assets to your loved ones while you’re still alive, setting up a trust, and making charitable contributions.

State Taxes

While a majority of states don’t impose estate or inheritance taxes, a dozen states* and the District of Columbia do have estate taxes. And a handful of other states** have an inheritance tax, where the heirs may have to pay the tax, although spouses are usually exempt from inheritance taxes.

State estate tax rates generally range from 15% to 20%. And it’s important to know that all states with their own estate taxes have much lower asset limits than the federal government. These currently range from $1 million to $5.74 million. Be sure to check what the asset limit is for your state when working on your estate plan.

*States as of 2020 with estate taxes include CT, HI, IL, ME, MD, MA, MN, NY, OR, RI, VT, and WA.  

**States as of 2020 with inheritance taxes include IA, KY, MD, NE, NJ, and PA.

Estate Planning Basics

Now that you’ve gone through your initial checklist, what do you do next? What legal documents do you need? Can you set up an estate plan on your own or should you seek professional help? Here are some of our expert estate planning tips.

What Documents Will I Need?

Person writing testament (Caption: How To Create An Online Will)We’ve detailed some of these documents above but want to give you a quick estate planning document checklist to help you eyeball everything you need to consider including.

  • Will
  • Trust
  • Letter of intent
  • Durable or limited power of attorney
  • Medical care directive
  • Medical power of attorney
  • Designated guardianship

Should I Consider Getting Professional Help?

Following our checklist above can save you a lot of expenses with the basics of estate planning in terms of initial legal advice. But you’ll need professional assistance once you get to the point of making your estate plan fully legal and binding.

But don’t be discouraged. There are ways to save money on legal fees if you seek help online from certified experts.

How Much Does Estate Planning Cost?

Estate planning costs can vary widely, depending on your needs. You may be able to find a lawyer that charges set fees for preparing a simple will or power of attorney, which could be as low as $150 per document.

However, if you want to set up a trust and a more thorough estate plan, you should expect to pay anywhere from $250 to $350 or more per hour for an attorney to prepare a thorough estate plan. So you could very well end up paying several thousand dollars.

While these costs may seem high now, they are far less than the emotional and financial tax your loved ones will experience if they are left to dig through your estate without a plan in place.

Online Estate Planning

Rocket Lawyer logoIf you’re trying to save money, you may want to consider going with an online legal service. Our experts recommend RocketLawyer — they’re reliable and trustworthy, and all the documents you create through their online service are fully legal and binding in a court of law.

RocketLawyer has several estate planning documents you can create online, including a last will and testament, a living trust, power of attorney, and many more. There’s an extensive section on documents you may want to file if you want to amend your existing estate planning, including revocations and codicils.

RocketLawyer also has a lot of helpful Q&A information about estate planning, and their attorneys are available to help you as you go through the process.

What Can Happen If I Don’t Have An Estate Plan?

The following brief video sheds important light on what could happen to your family if you don’t set up an estate plan.

Do You Need Life Insurance?

If one of your primary concerns is making sure your family will be financially stable when you die, then you may want to consider getting life insurance. Be sure to read our guide to all of your life insurance options, where we cover the major types, including whole, term, universal, and variable life insurance. We also give you tips on determining the ideal amount of life insurance you’ll need and how to find life insurance that meets your budget.

Do you think having an estate plan is worth the legal fees? 

About The Author:

While attending the University of North Carolina at Chapel Hill’s graduate school for journalism and public relations, Sally began a long career researching and writing about hard-to-understand topics, such as insurance and finance.

Her additional experience in marketing, fundraising, public relations and financial planning at various foundations and nonprofit organizations over the years has given her the practical tools to inform consumers about making the smartest business and personal financial decisions. Her work has appeared in many notable media outlets, including The Washington Post, Entrepreneur, People, Forbes, Huffington Post, and more.

Speaking of smart living — growing up in the (at-the-time) per-capita murder capital of the U.S. (Richmond, VA) taught her a thing or two about the need for personal and home safety. Sally stays on top of all the latest gadgets and services to protect her and her teenage daughters from potential predators and thieves. And she brings this knowledge to every article she writes.

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