Oct 01

Estate Planning 101

Tips for organizing your estate to preserve your assets for your designated beneficiaries.

Estate planning is not an exercise relegated to the wealthy alone. Indeed, anyone who wants to plan for the distribution of their assets or exercise their responsibilities after they die or if they become incapacitated should pursue estate planning. And for those who are wealthy with many assets, a strategic estate plan has the potential to help minimize various taxes after death, such as income, estate and gift tax. We offer a few tips to pursue basic estate planning.

Make a list. Check it twice.
Create a detailed inventory of your tangible and intangible assets, including real estate, vehicles, collectibles, financial accounts, investments, life insurance policies, retirement plans and business ownerships, among other items. As you create your list, estimate the values of each item, either with established figures (e.g., account details) or the value that you expect your heirs to assign to them. Valuation will help you distribute your assets equitably if that is a goal.

Clarify legal directives
An important part of an estate plan includes legal directives, such as trusts, financial power of attorney and a medical care directive. A trust designates where portions of your estate go, eliminating the need for probate, a court process that would initiate the distribution of your property. A financial power of attorney designates someone to manage your finances if you become medically unable to carry out the duties yourself. A medical care directive, or living will, details your medical care preferences if you are unable to make those decisions. Commensurate with this directive may include a medical power of attorney, a person to make medical-related decisions if you are unable.

Designate beneficiaries
If you have already prepared a will, you may have detailed your beneficiaries, but it may not cover all circumstances. Review your insurance and retirement accounts to ensure you have designated beneficiaries. Consider naming contingent beneficiaries too, which would apply if your primary beneficiary dies before you do and you neglect to modify the primary beneficiary designation before you die.

Estate planning during a divorce
There are additional considerations when going through a divorce. If you have already drafted a will, make sure that you review it (and if you don’t have one, work with an estate planning attorney to draw one up). The attorney will work within your state’s estate laws to distribute your assets properly.

Review your beneficiary designations for any pensions, 401(k)s and insurance policies. Note that a spouse is required under federal law to be the sole beneficiary of pension and 401(k) benefits unless that spouse waives such rights.

Review. Review. Repeat.
Revisit your estate plan regularly, especially if your personal circumstances change (e.g., you start a family, get married, start a new job etc.).

Seek help
You may benefit from consulting with an attorney who can help you draft a trust and/or various types of insurance tools to help protect your assets from estate taxes. Additionally, revisit your financial plan and goals with your financial advisor regularly, addressing any potential problems before they impact your savings.

This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation.
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal.
This material was prepared by LPL Financial.
To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL Financial affiliate, please note LPL Financial makes no representation with respect to such entity.

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