7 Best Steps To Creating a Good Estate Plan

You may have heard that you need to make an “estate plan,” but what does an estate plan cover and how do to make one? Here is a simple list of the most important estate planning issues to consider.

1. Calculate Your Net Worth

The very first step in building a good estate plan is to determine your net worth. It’s relatively easy to make a quick calculation of your net worth by adding up rough estimates of the values of all of your assets – including bank and investment accounts, personal property (jewellery, collectibles, cars, boats), pension plans, death benefit of life insurance, business interests, monies owed to you, oil and mineral rights, stocks and shares, bonds and real estate. Once you have added all of your assets you will then need to subtract the total all of your liabilities including credit card debt, car finance, other personal loans, and mortgages.

Once you have calculated your net worth you will need to figure out how much inheritance tax you will be subjected to.

2. Assess Your Financial and Family Needs for an Estate Plan

For some people creating an estate plan allows them to be confident in knowing that ownership of their assets will be split up exactly how they want without the need to go through court or legal proceedings. For some it allows them to be comfortable knowing that their family members are properly looked after, this is usually the case if you have young children, a blended family or a large family. Others may not have any family and want to make sure that those closest to them or causes they support receive a part of their estate.
Once you determine your overall need for an estate plan, be it for financial or family reasons, or both, the next step is to find and hire a qualified estate planning lawyer or regulated estate planning specialist to help you create your estate plan.

3. Determine if a Will is Enough

Once you meet with your estate planner it is always a good idea to determine if a will alone is suitable for your needs or whether you may need to take further steps such as setting up a living trust (a legal entity created to hold ownership of an individual’s assets).

4. Create a Plan for What Happens if You Become Mentally Incapacitated.

Disability planning is an important part of any estate plan, and yet it’s often given less attention than planning for what happens after someone dies. Without a good disability plan, your assets may end up in a court-supervised guardianship.

5. Create a Plan for What Happens After You Die

Once you’ve designed a good disability plan, the next step is to create a plan for what happens after you die. This will include deciding who will inherit what and when they’ll get it. Only you can decide if you want to leave your estate to family, friends, and/or charity. Once you decide who, you will need to make a plan for when they’ll get it.

6. Choose your Executors

As part of putting your estate plan together, you will not only need to decide what should happen to you and your property if you become disabled and what should happen to your property after you die, you will also need to decide who should be in charge of carrying out your wishes.
Selecting the right people as your estate planning executors is probably more important than deciding who gets what and when they’ll get it. Why? Because if the people you’ve chosen don’t want to or simply can’t serve, or if the people you’ve chosen do a bad job, then your beneficiaries will be unhappy and important decisions will be left up to a judge. In other words, all of that good money that you spent on your estate plan will have been wasted. It is also important to note that you can choose different people or institutions to fill different roles and multiple people or institutions to serve together, such as two people and an institution to manage finances and one person to make health care decisions

7. Review and Update Your Estate Plan

Once you’ve completed steps 1-6, unfortunately, you won’t be done with your estate plan. Why? Because things will happen day in and day out that will have a direct impact on your estate plan. In other words, the estate plan that you create today will be the perfect plan for you and your loved ones at this given point in your lives. But next week, or next month, or next year your life will go through a multitude of experiences, both good and bad, that will make today’s perfect estate plan not so perfect tomorrow.

For example, you could get married or divorced; have or adopt children; buy or sell a business; retire; move country; win the lottery; lose your spouse or other loved one due to an illness or injury or inherit a small fortune from a family member or friend. Aside from this, inheritance tax and gifting legislations can and will change. All of these things will have a direct impact on your estate plan, and so you will need to keep on top of these things in order to keep your estate plan up to date so that it will continue to work as you expect it to work as the years go by.

Don’t be lulled into a false sense of security once your initial estate plan is in place. Estate planning is a lifelong process, not a one-shot deal, and your plan needs to change as your life and the laws change.