As you grow older, having a comprehensive estate plan becomes increasingly important to ensure that your assets are distributed according to your wishes and to minimize the burden on your loved ones. Unfortunately, leaving your legacy behind to children, loved ones, or even friends is not easy due to the many loopholes to navigate and challenges within the legal system. Luckily, our New Jersey estate planning attorneys have put together this comprehensive estate plan checklist to help guide you through the process.
1. Inventory Your Assets
The first step in our estate plan checklist is to list all your assets, including real estate, bank accounts, investments, retirement accounts, life insurance policies, vehicles, and personal property. To determine the value of your assets, gather all relevant documents, such as account statements, property deeds, and insurance policies. Then, use current market values, professional appraisals, or online tools to estimate the worth of each asset.
2. Identify Your Beneficiaries and Create a Will
First, determine who you would like to inherit your assets. This may include family members, friends, or charitable organizations. Properly identifying your beneficiaries is a crucial part of the estate plan checklist. Next, create a will, which is a legal document that outlines how your assets will be distributed upon your death. In your will, you should:
- Name an executor who will manage your estate and carry out your wishes
- Designate beneficiaries for each of your assets
- Specify guardianship for any minor children (if applicable)
Of course, it is always wise to seek the counsel of an experienced estate planning attorney to draft your will. Failure to consult with an attorney places you at risk of creating a document that does not comply with your state’s laws, leading to potential disputes or probate issues. Additionally, you may overlook important provisions or tax-saving strategies, resulting in unintended consequences for your beneficiaries and possibly increasing the financial burden on your estate.
3. Consider a Living Trust
A living trust is a legal entity that holds your assets during your lifetime and distributes them after your death according to your instructions. It can help your estate avoid probate, a time-consuming and costly court process. Including a living trust in your estate plan checklist is especially useful if you own property in multiple states or if you want to keep your estate matters private.
4. Plan for Tax Exemptions
Understanding the federal and state estate tax laws allows you to take advantage of any exemptions or deductions available. For example, the federal government allows an estate tax exemption, which means only estates exceeding a certain value will be subject to estate tax. Consulting with an estate planning attorney and a tax professional can optimize your estate plan for tax purposes.
5. Execute a Power of Attorney
A power of attorney is a legal document that grants someone (called your agent) the authority to make financial and legal decisions on your behalf if you become incapacitated. There are two types to include in your estate plan checklist:
- Financial power of attorney: This is a legal document that grants your agent the authority to manage your financial affairs on your behalf. Such affairs may include paying bills, managing investments, filing taxes, and handling other financial transactions, particularly in cases where you become incapacitated or unable to manage your own affairs.
- Medical power of attorney: This document, also known as a healthcare proxy, grants your agent the authority to make healthcare decisions on your behalf. This becomes applicable when you are unable to communicate your own preferences or make informed decisions about your medical treatment due to incapacitation or other health-related circumstances.
6. Complete an Advance Healthcare Directive
Also known as a living will, this legal document outlines your preferences for medical treatment in situations where you are unable to communicate your wishes due to incapacitation or severe health conditions. It typically addresses issues like life support, organ donation, and pain management. A living will is distinguishable from a medical power of attorney; a living will specifies your desired medical treatments, while a medical power of attorney designates a person to make healthcare decisions on your behalf, which may encompass a broader range of decisions beyond those specified in the living will.
7. Review and Update Your Beneficiaries
Ensure that the beneficiary designations on your retirement accounts, life insurance policies, and other assets are up to date and consistent with your overall estate plan. It is important to review and update your beneficiaries to ensure that your assets are distributed according to your current wishes and to prevent unintended consequences. Life events such as marriage, divorce, the birth of children or grandchildren, or the death of a beneficiary can significantly impact your estate plan. Regularly updating your beneficiaries helps avoid legal disputes and ensures that your assets are transferred to the appropriate parties in a timely and efficient manner.
8. Store Your Documents
The best place to store your will and other related estate planning documents is in a secure and easily accessible location. Options include:
- A fireproof and waterproof safe at home: This provides protection against disasters and ensures that your documents are easily accessible to your executor and family members.
- A safe deposit box at a bank: This offers a high level of security but may require additional steps for your executor to access the documents after your death. Check with your bank and local laws to ensure a smooth process for your executor.
- With your estate planning attorney: Some attorneys offer document storage for their clients, keeping the original copies in a secure location.
Regardless of where you choose to store your documents, make sure to inform your executor, attorney, and trusted family members or friends about the location to ensure they can access them when needed.
9. Review and Update Your Estate Plan
It is essential to review and update your estate plan periodically, especially when significant life events occur. Events such as marriage, divorce, the birth or adoption of a child or grandchild, or the death of a beneficiary or executor often necessitate changes to your estate plan. Additionally, adjustments may be needed if your financial circumstances change, such as acquiring or disposing of significant assets like real estate, investments, or businesses. If you relocate to another state or country, ensure your estate plan is compliant with the laws and regulations of your new location. Staying informed about changes in federal and state tax laws is crucial, as they can impact your estate planning strategies. As a general rule, it’s a good idea to review your estate plan every 3-5 years to make sure it still aligns with your wishes and objectives. To help you navigate these changes and make any necessary updates, consult with an estate planning attorney.
Following this estate plan checklist will help you create a complete estate plan that is tailored to your unique needs. Consult with our experienced New Jersey estate planning attorneys at the Chamberlain Law Firm through our contact form or by calling us at (201) 273-9763 to ensure that your estate plan is comprehensive and complies with all applicable laws.
This article is for informational purposes only. It is not intended as legal advice. In the event you would like to speak with a lawyer about the specifics of your case, contact The Chamberlain Law Firm at (201) 273-9763 to schedule a consultation.