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  • Valerie Gospodarek, CFA

5 Easy Steps to Creating an Estate Plan

According to a 2015 online survey conducted by Harris Poll on behalf of Rocket Lawyer, 64% of Americans do not have an estate plan in place. This statistic is alarming, particularly if you want to designate how your assets are distributed at your death and not just rely upon how your state of residence divvies them up.

I’ve recently been working on updating my own estate plan, and I can certainly understand why many people put it off, despite its importance. First, who wants to think about dying? Second, who has time among the many daily tasks of work, children, home, etc.? Third, it’s complicated and often requires an estate-planning attorney to help you properly sort it all out. And lastly, that attorney will charge fees that you intended on using for your child’s tuition, your upcoming vacation, or something else, right? If you are one of those 64% without a formal estate plan, or even if you already have a will or trust but haven’t reviewed it in years, my steps below can help make the process less cumbersome and ensure that your assets are distributed exactly as you wish.

Step 1: Change your mindset

Think of your estate plan as simply a project to manage. If you take the emotional aspect out of the process, you are less likely to procrastinate on it. It doesn’t mean that you will die tomorrow, just that if you should die unexpectedly, you have ensured that your loved ones receive exactly what you want them to receive.

Step 2: Determine what assets fall outside of your will or trust

You may not realize or remember that beneficiaries you have designated on your life insurance policies, IRAs, 401Ks, etc. fall outside the confines of your will or trust. This is good news in that those named beneficiaries will receive the assets quicker than those named in a will because they bypass the probate process which can take anywhere from 6 months to 2 years. But you have to name those beneficiaries (including contingent ones) in order for that to happen.

Start by creating a spreadsheet that lists all of your assets. For those assets where you can name beneficiaries, list those beneficiaries and the approximate value of the asset. Now you can easily see how much of your estate will fall outside your will or trust and which assets you need to include.

Step 3: Update your beneficiaries

In the process of creating your spreadsheet, make sure your named beneficiaries are still appropriate. Perhaps when you initially took out that life insurance policy years ago, you were still single and listed your parents as your primary beneficiaries. But since then, maybe you’ve gotten married (and even had children). Chances are, if that is the case, you’ll want to change the beneficiaries from your parents to your spouse and/or children. Or maybe you’ve gotten divorced and never changed the beneficiary from your now ex-husband. Now is the time to make these changes – just ask the insurer/custodian for a Change of Beneficiary Form to complete.

Step 4: Create your will or trust

If you have a fairly simple or small estate, you can consider using a DIY resource like Legalzoom or Quicken to create your will. However, if your estate is complicated or significant in value, I recommend hiring an experienced estate-planning attorney. S/he will be able to answer any specific questions/concerns you have, as well as provide you with thoughtful recommendations and supporting rationale. S/he will also be able to create other pertinent documents such as an Advance Healthcare Directive (AKA Living Will) and a Durable Power of Attorney. Ask around for estate-planning attorney recommendations from friends and/or family members, and then interview those recommended attorneys on the phone to determine who you like best and feel the most comfortable hiring (most attorneys will provide a free 30 minute consultation for this purpose – if not, cross them off your list – you don’t want to work with them!).

Step 5: Review your plan periodically

Now that you’ve done the hard work of creating your estate plan, don’t forget to review it periodically. I suggest reviewing it annually (which should be quite easy if you created that spreadsheet I recommended in Step 2), but if not annually, at least whenever you experience a major life event, like getting married, having children, getting divorced, etc.

Don't wait until it is too late to begin this process! If you need help with Steps 2 & 3, give me a call at (925) 954-4966 for a free consultation.

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