Estate Planning Checklist

Estate planning can feel overwhelming. It forces you to consider your mortality – but when the time comes, your family will be grateful you did.

A proper estate plan ensures that your family does not have to second-guess how your assets are distributed. It also helps to save probate fees and estate taxes, ensures that the most capable person takes care of your minor children, and avoids family feuds over inheritance.

If you are considering an estate plan but are not sure where to start, this blog post. We will cover everything you need to know about checking estate planning off your list.

What is estate planning?

Estate planning is the process of drafting a strategy for the management and distribution of your estate after your death. Your estate is the net value of everything you own, such as your:

• House and other real estate assets
• Bank accounts
• Car
• Personal belongings
• Digital assets
• Life insurance
• and more

While certain debts might be passed on to your estate after your death, the value of your estate when you die is the sum of your assets minus any such debts.

You cannot take your estate with you when you die, but you do have control over what happens to it. An estate plan guarantees that your assets are distributed according to your wishes. Yet, a smart estate plan accomplishes much more. It also performs the following functions:

• Names a guardian for any minor children
• Name the individual who will manage your funds if you become incapacitated
• Name of the person who, if you become incapacitated, will make medical and personal care decisions on your behalf
• Safeguards your assets against creditors or in the event of divorce

The provision for a financially irresponsible family member also reduces the probate fees and estate taxes upon death.

Estate Planning Checklist

Creating estate plan may appear difficult, but it doesn't have to be. Here's a checklist of the essentials to get you started:

1.Create a list of assets

Your estate includes both tangible and intangible assets. Homes, other real estate, collectibles (antiques, art, or coins), vehicles, and other personal possessions are common tangible assets included in an estate. Bank accounts, mutual funds, stocks, and bonds, life insurance policies, health savings accounts, retirement plans, and company ownership are examples of intangible assets that may be included in an estate.

Following the preparation of a list of your assets, the following stage is to assess the value of each item. Certain assets, such as a home or a stake in a business, may necessitate outside valuations.

Once you've determined the entire value of your assets, use the following method to calculate your net worth:

The value of your estate = the total value of all your assets – the total value of debts that would pass on to your estate at death.

Knowing your net worth makes it easier to ensure the estate is distributed equitably among family members. 

2.Protect your family’s needs

Now that you know your estate’s worth, it is time to think about protecting your assets and your loved ones after death. Here are some tips:

• Ensure that you have appropriate life insurance coverage - Without life insurance, your family may be compelled to tap into your savings or sell some of your possessions to cover day-to-day living costs. If you're wondering how much life insurance you need, it depends on a number of circumstances, including whether you're married and whether you have a dual-income family. If you have not yet started saving for your children's college tuition or if you have a special-needs child, your family may want even more life insurance protection.

• Make a guardian appointment for your minor children - Remember to name a guardian — as well as a backup guardian — for your minor children. If both parents die without a will and their children are minors, the court will choose someone to care for them. This process might take weeks or even months, and there is always the potential that the court will select someone you believe is not qualified for the job.‍

• Leave a set of instructions for the guardian - Don't assume that the guardian shares your parenting philosophy or that a judge will accept your views if the subject goes to court. Provide precise instructions for the guardian in a letter that goes with your will to avoid ambiguity. Do not include parenting instructions in the will. A will specifies crucial appointments as well as estate distribution strategies; it is not the place for general directions.

• Set up your directive - For an estate plan to be comprehensive, it should include legal directives. 

• A Trust – A trust may be appropriate depending on the value of your estate, personal circumstances, and financial aspirations. You can put parts of your estate in a revocable living trust. If you become incapacitated or unwell, the assets will be managed by a co-trustee trustee. After your death, the assets held by the trust will be distributed to the designated beneficiaries without the need for probate. But, this sort of trust does not protect your assets from creditors. If this is an issue, consider establishing an irrevocable trust. Creditors cannot seize assets deposited in it.

• A medical power of attorney – A medical power of attorney is a legal instrument that grants someone you trust the authority to make medical care decisions on your behalf if you are unable to do so yourself.

• A durable financial power of attorney – This legal document allows you to appoint someone you trust to manage your finances if you become incapacitated. If you are hesitant to give someone significant power over your funds and property, consider a general power of attorney instead. As comparison to a durable financial power of attorney, a general power of attorney has less powers.

• Be careful with the power of attorney – Pick an attorney you really trust because he or she will have significant authority over your financial affairs as well as significant duties

3.Review your beneficiary designations

Wills and other estate planning documents allow you to communicate your preferences. They may not, however, cover everything.

• Check the beneficiaries on your insurance policies. The same is true for your retirement funds. Avoid assigning your estate as the beneficiary because this will force the account to go through probate. In this case, provincial legislation will determine who receives the funding.
• Make sure to review your beneficiary selections on a regular basis. For example, if you fail to remove your ex-spouse as the beneficiary of your insurance policy after your divorce, your current spouse will not receive a death benefit.
• Make a list of potential beneficiaries. If the principal beneficiary dies, they receive the amount.

4.Consider professional help

A well-written will is likely to suffice for small estates. Nevertheless, if your estate is huge and complex — consider business troubles, non-family heirs, or worries for a special-needs child — you may want the services of an estate planning expert.

5.Reassess your estate plan when a major life event occurs

As your circumstances change, so should your estate strategy. A loss of a family member, marriage, divorce, the birth of a child, and a job shift are all major life events that may necessitate a review of your estate plan.

Common Estate Planning Tools

A complete estate plan includes numerous instruments to ensure that your estate is properly handled and distributed after your death, and that your loved ones do not have to second guess your final desires. The most popular estate planning tool is a will, but it is not the only one to consider. A power of attorney might be equally as important as a Will in estate preparation.

1.The Will

A will is a legal document that specifies how your estate should be allocated after your death. You can write your own will or have one prepared by an attorney. To make your will legally binding, you must sign it in the presence of two witnesses, who must then sign it to prove they saw you sign it.

Apart from including an estate distribution plan, your will should include: 

• Name of your estate's executor (Ideally, you should also include a secondary executor, who will come into the picture if the primary executor is no longer willing, available, or able to take the responsibility)
• Name of your underage children's guardian
• Your funeral or memorial service wishes

As important as a will is for estate planning, understanding its limitations are also important. A will cannot: 

• Avoid probate fees by avoiding it. The legal procedure of verifying and validating a Will is known as probate. This is a process that almost every will must go through. Probate usually takes a few months, if not a few weeks. Yet, it is not uncommon for estates to take up to a year or two to settle. Your estate is responsible for paying the costs of probate.
• Reduce your estate tax when you die.

A trust can help you where a will falls short.

2.Trust

A trust holds assets that you previously owned and uses them for the benefit of your beneficiaries. There are various types of trusts, each with its own set of qualities. The type of trust you require is determined by your estate, financial goals, and personal circumstances. If you choose, you can have more than one form of trust. A trust, unlike a will, contains a lot of legal jargon, and as such, you'll probably need professional help to set one up.

A trust can help you: 

• Avoid probate: Trusted assets can avoid probate. An irrevocable trust is one that cannot be changed or revoked later.
• Protect your beneficiary: Assume your child is not a minor but is not financially mature. Instead of leaving your entire inheritance to her after your death, you can establish a trust to handle the assets for your child's benefit. The trust can manage funds until she reaches a specific age, such as 35, or for the rest of her life.
•  Lower estate tax:  The estate tax can reduce your inheritance. If your estate is expected to face a large tax burden, putting your assets in an irrevocable trust is a viable choice. An irrevocable trust's assets are not included in your estate. The lower the estate tax, the fewer assets your estate owns.
• Protect assets: If you want to protect your estate from creditors, an irrevocable trust can help. Because assets placed in a trust are no longer part of your estate, creditors cannot utilize them to recoup money owed to them when you die.
• Provide for a disabled beneficiary: If you leave an inheritance to a disabled family member, they may forfeit their government disability benefits. Income requirements for public disability benefits are typically lower. Establishing a trust fund for the disabled relative helps ensure that they have access to both their inheritance and government payments.
• Establish a line of beneficiary: Assume you want to leave your fortune to two children from a prior marriage. At the same time, you want to provide for your current spouse in the event that you die first. In such cases, a spousal trust can be an excellent answer. It will support your spouse for the rest of his or her life. When your spouse dies, the trust will divide the assets among your children in accordance with your intentions.

These are just a few examples of how you might benefit from trust. Consult an estate planning expert about your financial goals to determine whether you should establish a trust as part of your estate planning.

3.Power of Attorney

A power of attorney (POA) is a legally enforceable document that delegates authority to one or more individuals or a trust business to make financial and medical decisions on your behalf if you are unable to do so due to disability, disease, ageing, or any other cause. Because your POA may be in charge of your legal, financial, and health decisions, you should select someone you trust, who knows your values, and who will act in your best interests.

The four most vital estate planning factors

#1 – How complex is your estate? 

Almost everyone has an estate, but not all estates are straightforward. The type of estate planning paperwork and resources you require is determined by the complexity of your estate. If you are a high-net-worth individual, you will most certainly require a more detailed estate plan and should see an estate lawyer. Other factors that can complicate estate planning include establishing complex trusts, possessing assets in foreign nations, and owning a business.

#2 – What life stage are you in? 

Are you accountable for your aging parents' financial well-being? Are your kids still small? If this is the case, ensuring the financial well-being of your dependents after your death is likely to be your top priority. If you are retired and have no dependents, you may wish to use estate planning to leave a lasting legacy through charity giving rather than naming beneficiaries.

#3 – What are your personal goals? 

Do you have a complicated and significant inheritance that you want to ensure is distributed evenly among your heirs? Do you have an estate plan in place to provide for a special-needs child? Before you go down to establish an estate plan, you must first understand why you want one.

#4 – Who are the individuals you trust most?

When granting power of attorney, it is preferable to choose someone in whom you have complete trust. After all, if you are unable to make decisions for yourself, this person will handle your financial affairs. You should also appoint someone trustworthy as executor of your Will to ensure that your final desires are carried out exactly.

Do I need an estate planning lawyer?

You may need an estate planning lawyer if: 

• You have a sizable and complicated estate.
• You are unsure of which estate planning tools are appropriate for you.
• You wish to establish either a revocable living trust or an irrevocable trust.

Where does life insurance fit in estate planning?

Life insurance can be a vital cog in your estate planning. It can help you with: 

• Estate preservation – One of the primary purposes of estate planning is to maximize the value of the estate passed down to your loved ones. Funeral expenses, tax responsibilities, probate fees, and legal fees, on the other hand, can lessen the legacy you meant to leave behind. Life insurance proceeds can help meet these expenses while also preserving the value of your estate.

• Estate equalization - Passing down some assets, such as a home or a family company owner, to more than one family member can generate practical and administrative difficulties in the future. At the same time, if your estate lacks cash to balance inheritances, leaving a single item completely to one family member may cause inequity. A life insurance policy can provide a way out of this scenario. Assume you own a firm outright but only one of your two children is actively involved in it. You can leave the entire business to this child while naming the other child as the sole beneficiary of a life insurance policy for the value of your business.‍

• Estate creation – When you pass away, life insurance can provide an immediate estate for your heirs. This is because the funds are distributed straight to them, effectively skipping probate.

Is estate planning right for me?

An estate plan is a road map for managing and distributing your estate after your death. A will alone may be sufficient for simple estates. If you have a large or complex estate, you will almost certainly require various estate planning tools as well as legal guidance.

Life insurance can be an important aspect of your estate plan, especially if you want to maximize the value of the estate your descendants inherit or ensure that all of your heirs receive an equal inheritance. Dundas Life can help you discover the proper life insurance coverage for your estate planning needs at a very reasonable price.