Estate Planning Checklist for Pre- and Post-Death Planning

Estate planning refers to the management and distribution of an individual’s assets in the event of their incapacitation or death. It goes beyond just writing a will; it includes a variety of legal tools that help ensure your wishes are respected, minimize tax burdens, and provide a clear path for your loved ones to follow during emotionally challenging times.

Without proper estate planning, your assets could be subject to state laws, which may not align with your desires. According to a survey, only 33% of Americans have a will or an estate plan in place​. This lack of planning can lead to prolonged legal disputes, higher taxes, and the state deciding how your assets will be distributed.

An effective estate plan dictates how your assets will be divided and addresses key decisions about your health care and finances in case of incapacitation. By covering pre- and post-death scenarios, estate planning provides a comprehensive strategy to protect your assets, reduce taxes, and safeguard your family’s financial future. A financial advisor can help create an exhaustive estate planning checklist to cover pre- and post-death planning and safeguard the financial well-being of your family members in your absence.

This article covers pre- and post-death actions you need to take and certain tips that will help make estate planning a smooth affair for your heirs.

Below are certain estate-related actions that should be taken after your death:

After a person passes away, the responsibilities shift to the executor and surviving family members to manage and distribute the estate. Here are key actions that need to be taken to ensure the smooth administration of the estate:

1. Probate

The probate process is the legal procedure in which the authenticity of the will left behind is validated and executed. After the individual’s death, the executor named in the will presents the document to the probate court. The court then oversees the process to ensure the will is legally valid and that the deceased’s assets are distributed according to their wishes. If there is no will, the estate is distributed according to state laws of intestacy, which can lead to outcomes that might not align with the deceased’s desires.

Probate is crucial because it provides an official forum for resolving any disputes or claims against the estate, such as challenges to the will or claims by creditors. While it is often seen as time-consuming, probate helps ensure that asset distribution is orderly and legally binding.

2. Handling debts and bills

After death, outstanding debts and bills must be addressed by the estate. The executor is responsible for identifying all debts, including mortgages, loans, credit card balances, and utility bills. These obligations must be paid from the estate’s assets before anything is distributed to the heirs. If the estate’s funds are insufficient to cover the debts, creditors may not receive the full amount owed. However, beneficiaries generally do not inherit debts unless they are co-signers or jointly responsible for certain obligations.

3. Distribution of assets

Once the probate process is completed and all debts and expenses have been paid, the executor can begin distributing the remaining assets to the beneficiaries as outlined in the will. This involves transferring titles for property, distributing financial assets, and ensuring that any specific gifts or bequests are honored. The executor plays a critical role in ensuring that these transfers are done correctly, whether it involves distributing funds, real estate, or personal property.

The executor should keep detailed records of all distributions and provide a final accounting to the court (if required) to close the estate formally. Proper management ensures the beneficiaries receive their rightful inheritance and the estate is closed without further legal entanglements.

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Pre-death estate planning checklist

1. Take an inventory of assets: Start by making a detailed list of all your assets. This should include tangible assets like real estate, vehicles, jewelry, and valuable personal items, as well as intangible assets such as bank accounts, investments, retirement funds, life insurance policies, and digital assets (e.g., online accounts and passwords). Keeping an updated inventory helps avoid overlooked assets during estate distribution and makes it easier for your executor to manage your estate.
2. Establish wills and trusts: Estate planning and wills go hand in hand. A will is essential for specifying how you want your assets distributed after your death. It also allows you to appoint guardians for minor children. However, in some cases, setting up a trust might be more beneficial. Trusts offer greater control over how and when beneficiaries receive their inheritance, can help avoid the probate process, and may offer privacy and tax benefits. Trusts can be especially useful if you have complex family dynamics or wish to support a minor or disabled dependent. It is important to understand the differences between both and make an informed decision. A financial professional can be an invaluable resource, who can take your unique circumstances into account and guide you on the right way to go about it.
3. Designate beneficiaries and update based on changes in life circumstances: Many financial accounts, including life insurance policies and retirement accounts, allow you to designate beneficiaries. This ensures these assets are passed directly to your chosen individuals, bypassing the probate process. It’s important to review and update these designations regularly, especially after major life events such as marriage, divorce, or the birth of a child, to ensure that they align with your current wishes.
4. Consider assigning powers of attorney: Assigning financial and medical powers of attorney ensures that someone you trust will manage your finances and make healthcare decisions on your behalf if you become incapacitated. The financial power of attorney manages your property, bank accounts, and other financial affairs, while the medical power of attorney makes decisions related to your health care. Establishing these documents early prevents last-minute legal hurdles and ensures your wishes are followed during difficult situations.
5. Pay attention to tax planning: Minimizing estate taxes is a critical part of estate planning. Strategies such as gifting during your lifetime or establishing an irrevocable trust can help lower the tax burden on your estate. For example, the annual gift exclusion allows you to give away a certain amount of money tax-free every year (in 2024, this amount is $17,000 per person). By strategically gifting assets, you can reduce the value of your taxable estate.Additionally, setting up an irrevocable life insurance trust is a common tactic for avoiding estate taxes on large life insurance policies. This type of trust keeps the death benefit of your policy out of your taxable estate, which can be crucial for high-net-worth individuals.State-specific taxes can also impact estate planning. Some states have their own estate taxes or inheritance taxes, which apply even if you don’t meet the federal estate tax threshold. Consulting with a tax professional can help ensure your estate plan optimizes tax efficiency and complies with federal and state tax laws.
6. Make funeral arrangements well in advance: Planning your funeral can relieve your family of both emotional and financial stress. By making decisions about burial or cremation, and possibly pre-paying for services, you ensure that your final wishes are respected and prevent potential disputes among your loved ones. You may consider pre-paid funeral plans to make the process fairly easy for you.
7. Consider estate planning for your digital assets: This may seem unusual but the current digital age necessitates special attention towards digital assets while planning your estate. Without proper planning, accessing digital assets can be a legal gray area for your loved ones. These assets can include everything from social media accounts, email accounts, and cloud storage to cryptocurrency, intellectual property stored digitally, and even online bank accounts. It’s important to provide clear instructions for how these assets should be accessed, managed, or distributed after death. Many individuals fail to include these in their estate plans, leading to potential complications.For example, consider setting up a digital estate plan that designates a digital executor who will have the legal authority to access and manage your digital assets. Create a digital inventory that includes login credentials for important accounts. Some platforms, like Facebook, even allow you to designate a legacy contact who can manage your account after your death.

Important estate planning tips that you should not ignore

Estate planning isn’t a one-time task; it requires regular attention to ensure it remains effective. Here are some practical tips to keep your estate plan up to date and avoid common pitfalls:

1. Regularly review and update your plan: Your estate plan should be a living document that evolves as your life changes. Major life events such as marriage, divorce, the birth of a child, or the purchase of a new home can significantly impact your estate planning needs. Regular reviews ensure that your will, trusts, and beneficiary designations reflect your current wishes. For example, a new child or grandchild might need to be added to your will, or an ex-spouse removed from a life insurance policy. Keeping these documents up to date prevents unintended consequences and legal complications down the road.
2. Work with a professional: While it’s possible to create an estate plan on your own, working with an estate planning attorney or financial advisor is highly recommended. Professionals can help you navigate complex issues, such as tax laws and the proper structure of trusts, and ensure that your plan is legally sound. They can also help you avoid pitfalls like outdated wills, improper beneficiary designations, or neglecting state-specific legal requirements.

To conclude

Estate planning helps to prepare for the inevitable. You can use it to protect your loved ones and ensure your assets are distributed according to your wishes. Having a well-thought-out and updated estate plan can help provide financial security for your family, minimize taxes, and avoid the potential legal complications that can arise when no clear plan is in place. You may also hire a financial advisor for estate planning advice who can ensure you are on the right track and have a pre- and post-death planning checklist in place.

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