Financial Planning and Retirement

Tips for Putting Your Estate Plan in Order

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    • FNBO

      Wealth Management
      Aug 17 2022

Article | Read time: 4 minutes

Planning for the future can be difficult, especially when it is focused on what will happen after you die.  If you have avoided planning, there’s no time like the present to consider important legal and financial decisions you’ve been putting off, including your estate plan.

Here are some best practices to help get your financial and estate plan in order:

  • Review your estate plan to ensure you have the necessary legal documents in place. Putting together an estate plan may seem like a daunting task but it doesn’t need to be. This article explains the basics of how to get started. If you already have a plan in place, that’s great! But estate plans often need to be updated as life changes. If your financial circumstances changed; if you moved to a new state; if you or your beneficiaries separated, divorced or remarried; if beneficiaries were born or died; or if your children became adults, your estate plan should be reviewed and updated.

    If you don’t have an estate plan, it’s important to create one because each state has different laws of intestacy. Intestacy is the state of passing away without a will, which then requires the estate to go through probate court. Without an estate plan, your hard-earned assets may not be distributed as you would like.

  • Include a HIPAA authorization in your power of attorney for medical decisions. The federal Health Insurance Portability and Accountability Act (HIPAA) set privacy rules for patient records. A HIPAA authorization ensures healthcare providers will share your private health information with the people you name.

  • Review your titling and beneficiary designations to ensure the individuals you want to benefit will be the ones who receive the proceeds. Assets can be titled in your individual name, jointly with another person or in the name of a trust, all of which will have different consequences and should be coordinated with your estate plan. Review titling of bank and investment accounts, real estate and closely held company ownership. Beneficiary designations for assets such as life insurance and retirement accounts control who receives the asset upon your death, even if the beneficiary is different than what you provided for in your estate plan. If you name individuals as beneficiaries, consider naming contingent beneficiaries in the event the primary beneficiaries die before you.

  • Consider how you store your estate planning documents. Original documents can be kept by your estate planning attorney in a locked, fireproof safe. In your own records, you should keep copies, along with a high-quality digital scan, which could be saved in an online vault for easy access from anywhere. Also consider providing copies to your financial advisor, healthcare provider, successors named in the documents and others who need to know about your estate plan. A binder with information is a great way to keep this all safe and in one place, just make sure you do not include full account numbers. Additionally, you should include relevant contact information, so your loved ones know who to reach out to if necessary.

  • Save a list of your digital accounts and passwords. Along with estate planning documents, everyone should maintain a list of their digital assets and how to access them. Make sure to keep this information secure and don’t share it with others.

  • If you are a business owner, plan for your succession as a manager and owner of the business. If you have built a business, it may be the largest asset you own. It’s never too early to create a plan for your succession to ensure the long-term success of your business and your family.

  • Consider a GRAT or an IDGT. If you are seeking more sophisticated planning strategies, consider using a Grantor Retained Annuity Trust (GRAT) or the sale to an Intentionally Defective Grantor Trust (IDGT) to “freeze” the value of assets in your estate and pass future appreciation to family members at virtually no estate or gift tax cost.

In addition to the important estate planning tactics above, consider making gifts or loans to family members. If you’d like to make a gift to a family member or to a trust for their benefit, consider using the $16,000 annual gift tax exclusion and the $12.06 million gift/estate tax exclusion to make tax-free gifts of depressed property that are likely to appreciate in value.

You also may want to offer loans to family members with very low interest rates. If your family member invests wisely and has a greater return than the note’s interest rate, they will retain the upside at no gift tax cost.

While it may feel overwhelming to think about death and focus on your estate plan, once you develop a plan, you will be happy you made it a priority. If you need help with your estate plan, FNBO’s trust team is here to help.

This material is provided for informational purposes only. It does not constitute legal, tax, accounting, or other professional advice. It is subject to change without notice. Information contained herein from third-parties was obtained from sources considered to be reliable. However, its accuracy, completeness, or reliability is not guaranteed. Linkage to any third-party content is for informational purposes only and in no way implies an endorsement or affiliation of any kind with any third-party. FNBO bears no responsibility for any third-party sites or content. This material was created as of the date indicated and reflects the author’s views as of such date. Neither the publisher nor any other party assumes liability for any loss or damage due to reliance on this material.