Trust & Estate

Estate Planning Primer: How To Get Started

Estate Planning Primer: How To Get Started
Erich Yost
October 31, 2023

Crafting an estate plan from scratch can feel daunting. Estate planning often falls by the wayside despite its importance. Getting started on an estate plan shouldn’t cause this much anxiety, but it can be difficult to know how to get started. There are plenty of ways you can prepare before ever talking to an estate attorney.  Here are four important considerations to think about as you begin the estate planning process.

Evaluate Existing Estate Plan

Start by taking stock of where you stand with your estate plan right now. Maybe you haven’t started at all. Perhaps you created a basic will when your first child was born, but that may have been years ago. Dig out all those legal documents and read through them. Take notes on the objectives of those documents and whether you still agree with them today. It is also important to summarize your financial assets in one place so that you fully understand what assets exist that can be inherited. Create a balance sheet with all brokerage and retirement accounts, private investments, real estate assets, debt and other liabilities. This is where it helps to work with a financial advisor that can assist with, or even help guide your estate planning process over time as your net worth grows and evolves. 

Thoughtfully Consider What You Would Like To Happen To Your Assets

This can be an incredibly broad and overwhelming task. It helps to begin with some simple questions that you can think about yourself or discuss with your spouse, including:

  1. Who do you want to receive your assets upon your death? Family members, charities, or a combination? Do you want to include or exclude in-laws? You’ll want to think about contingent beneficiaries in case primary beneficiaries predecease you or the next generation doesn’t have children.  
  2. What restrictions, if any, would you like to place on these assets after they have been transferred to your heirs? You can transfer assets to heirs with no restrictions through your will, but trusts can be used to place guardrails around when and how the assets can be used. Two common restrictions are based on age and bloodlines.  You might even consider providing the next generation access to “income” while the “principal” is meant for their children or for a charity. 
  3. Will assets be separated pro-rata across all beneficiaries or are certain individuals better suited to receive certain assets? This normally impacts non-marketable assets such as real estate, private investments, and closely held business interests that are difficult to split among multiple owners. It is also possible that some of your heirs may be better positioned to manage these assets than others.  
  4. Who are the individuals that can carry out your estate plan once you are gone? This includes an executor of your will, durable and healthcare power of attorney, and trustees of relevant trust assets. This is a complicated topic that warrants further discussion, but consider all family members, close friends and trusted service providers, such as estate attorneys and corporate trust companies, that may be able to serve in these roles. Sometimes a close family member isn’t always the best choice and there are several reasons to choose individuals outside your immediate family and avoid beneficiaries when selecting trustees. 

Identify Basic Estate Planning Documents

There are several basic documents needed to carry out any estate plan. Ensure you have considered the following list as you begin the process:

  1. Will (Last Will and Testament): This describes how to distribute your assets in your estate after your death. A will should name an executor to help settle the estate of the deceased individual.
  2. Durable Power of Attorney: This provides broad decision-making authority covering legal and financial arrangements to an agent in the event the individual becomes incapacitated. Defining the point at which someone becomes incapacitated can be difficult but is necessary. 
  3. Healthcare Power of Attorney: This provides limited authority to an agent for the purpose of making medical decisions on their behalf if they are determined to no longer be able to make decisions for themselves. Outlining your desires and wishes for medical care ahead of time will help your POA make decisions when the time comes.
  4. Beneficiary Designations: Retirement accounts (401k, 403b, IRA, HSA) and insurance policies offer the ability to name beneficiaries that are tied directly to the account or policy. These beneficiary designations allow for the transfer of assets outside a will.  However, it is important to ensure they are completed and remain up to date as your estate planning goals evolve. 
  5. Letter of Intent: Estate planning documents can be lengthy and full of legal jargon, making it difficult for an executor or other loved ones to fully understand their meaning. A letter of intent attempts to explain, in plain language, the overall goals of the individual’s estate plan and provide a compass for decision-makers to follow as the estate plan is executed. This letter can also be used to document in writing how the author would like their assets to be used. While not required, a letter of intent can be very helpful to grieving family members as they navigate the estate settlement process. 
  6. Revocable Trust: A basic trust structure that remains in your estate, revocable trusts offer the ability to transfer assets outside the probate process associated with last will and testament documents after death. This can save money and time when settling the estate of someone who has recently passed away. Revocable trusts can also provide privacy when compared to the probate process, which becomes public record. 

Determine How Other Professional Advisors Will Be Involved

While it is important to establish your goals and ultimately draft estate planning documents to put your plan in action, it is equally important to maintain and update your estate plan over time. It can be tempting to mark your estate plan as completed, shift focus to other areas of your life and not revisit it for years. An estate plan should be revisited once per year by either yourself or together with your trusted service providers. Make it a priority to work with financial advisors, accountants and estate attorneys that are collaborative, will work together to execute your plan during the normal course of business, and who will also look for ways to add value by proactively helping you update it as you progress through life.