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How to Make an Estate Plan

Making an estate plan is one way to designate how the assets you've acquired over the course of your life will be shared after you die. Though it may sound like a huge task, it doesn't have to be a complicated process. With a few simple steps, you can get the documents you need in order and put your wishes down on paper.

 

Perform an Asset Inventory

A sound estate plan begins with a thorough inventory of your assets. Since an estate plan's primary purpose is to direct the distribution of your assets after you die, you need to know what you have before you decide where those things should go.

Tip: Pay careful attention to how assets like property and accounts are titled (who is the owner?) and whether it has beneficiary designations. Assets not titled correctly can undo even the most carefully designed estate plans.

Here are some basic asset categories to help you start on your asset inventory:

Financial assets

  • Bank accounts
  • Investment accounts
  • Retirement plans
  • Health savings accounts
  • Life insurance
  • Businesses you own

Physical assets

  • Real estate
  • Cars, boats, or other vehicles
  • Collectibles
  • Artwork
  • Family heirlooms and/or other items of significant monetary or sentimental value

 

Take Care of Your Family's Needs

After completing the asset inventory, you'll have a reliable picture of the assets you have to provide for your loved ones in the event of your death. The next steps to take will help you provide for your family beyond what you already own and have accumulated.

Detail your children's needs.

In your will or trust, you can recommend a guardian for your minor children. You can also name a successor guardian if the primary guardian is unavailable to assume responsibility.

Assess your life insurance needs.

If you own a home, you might want to consider a policy that covers paying off your mortgage. You might also want a policy that provides enough cash savings for your family to feel secure in the coming years. Depending on the size of your estate, you might also need to plan for paying estate taxes. Your financial advisor or insurance broker can help you determine how much life insurance you need to meet your goals.

Discuss your plans.

When it comes to your estate plan, it's important to involve key family members in your decision-making process. Speak to your spouse or partner about your finances. Talk about your shared wishes for your children. Most importantly, have the tough conversations about extended family and how they'll play into your overall estate plan so there isn't any confusion.

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When it comes to your estate plan, it's important to involve key family members in your decision-making process.

 

Set Your Beneficiaries

It's important to detail who will inherit your assets and put your wishes in writing. Here are three areas where you'll need to set up beneficiaries:

  • Your retirement accounts (IRA, SEP-IRA, 401(k), pension plans).
  • Life insurance.

Make sure you name primary and contingent beneficiaries for all accounts. It's also important to periodically review your beneficiaries on all your financial accounts, especially if you get married, divorced, or have children. Be aware that an account or life insurance policy with a designated beneficiary, or beneficiaries, will not be controlled by your will or trust and will pass according to the terms of the account or policy outside of your estate.

 

Complete Key Estate Planning Documents

Your estate has several moving parts, all of which work differently to protect you and your family. Having the right estate planning documents in place is an essential part of ensuring your wishes will come to pass.

Some documents come into effect while you're still alive, and others take effect when you die.

A will or revocable trust states how to distribute your assets and to whom, as well as the person you want to be in charge of distributing your estate (an executor or trustee).

A letter of instruction can accompany your will and can state your intentions for events such as your funeral, preference for burial or cremation, and the location of assets mentioned in your will or trust.

A durable power of attorney can designate a person to make decisions about your finances or healthcare if you cannot.

Advanced medical directives designate who can make medical decisions on your behalf if you become unable to make those decisions for yourself.

 

Plan for Funeral and Burial Costs

Did you know the median cost of a funeral with viewing and burial in the U.S. for 2023 was $8,3001, while the median cost of a funeral with viewing and cremation was $6,280? The expenses can leave loved ones blindsided, even without a big, formal funeral.

To help ease the burden on your family, your estate plan should include conversations about what should happen after you die. These can include:

  • What should happen to your body when you die (e.g., burial, green burial, cremation, donating your body to science).
  • How you'll pay for funeral expenses (e.g., prepaid funeral or cremation plan, transfer-on-death bank accounts, life insurance).
  • Ceremony details (e.g., location, type of ceremony, guest list, speakers).

 

Discuss Document Storage

Since your estate plan is, essentially, a collection of legal documents that detail your wishes, you'll want to store them safely and make sure your loved ones (and the executor or trustee) know where to find them. You should also consider a secure digital storage vault to hold copies of these documents and make sure family members have access to this vault.

Your estate plan is a process that helps secure your legacy after you die. Speak to a trust officer or estate planning attorney to start a conversation about your needs. The sooner you start your estate plan, the closer you'll be to peace of mind.

When it comes to your estate plan, it's important to involve key family members in your decision-making process.

Important disclosure information

This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.

  1. National Funeral Directors Association, "Average Funeral Cost in the U.S.," accessed April 22, 2024. Back