7 Steps To Successful Estate Planning

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7 Steps To Successful Estate Planning

by | Jun 17, 2021

There are a few general steps to follow when creating an estate plan. First, make sure you have one that’s updated and revised regularly. Next, get all of the essential documents in order, including your will, power of attorney, living trust, and any advanced medical directives.

Those are the basics, but there are additional steps to ensure success. Avoiding key mistakes is important, but you should also ensure that you cover the things that are often overlooked.

Mistakes in estate planning are common, no matter how much the estate is worth. But avoiding them is easy if you follow these seven steps to successful estate planning.

1. Prepare for conflicts.

When one or both parents pass and there is a substantial estate involved, many family conflicts come to the surface. Often, the estate plan itself can increase tension or cause resentment or anger.

To avoid this, it’s important to be realistic. Don’t assume that the kids will work it out once the parents are gone. Long-term tension or conflict is unlikely to go away when the estate is involved; it’s more likely to get worse.

Discuss these conflicts with your estate planner as well as any concerns you have about passing on property to heirs with vastly different personalities, goals, or philosophies. While you may not be able to avoid every conflict, an effective estate plan can provide some cohesion rather than driving a bigger rift between family members.

2. Understand the basics.

Many people do not understand even the basics of their estate plans and what they do. While some of the details can get complicated, not understanding even the basics is a sure-fire way for the plan to fail.

If you have questions, don’t hesitate to ask your estate planner. Write down any questions you have before meeting with your estate planner, and take notes while you’re there to ensure you can go back and refresh your memory once you get home.

3. Educate heirs.

No matter how successfully you plan, you can’t control what happens when your heirs inherit your estate. Many times, the next generation is uneducated or unprepared to inherit the estate. They mismanage or waste funds or make bad investments. An estate plan is not successful unless it’s managed to the intentions of the estate, and that can take some work.

While trusts are always an option, a better way forward is to educate the next generation about wealth. Inherited wealth is not always likely to cause problems as most heirs are aware of how much they are likely to inherit and how hard their parents worked to build their wealth. But sudden wealth can be a problem. Education about accumulating, managing, giving, and spending substantial amounts of money.

4. Consider living trusts.

Failing to establish a living trust is one of the most common avoidable mistakes. A living trust establishes a process for how the estate will be managed in the event of disability or death, but the trust has to have a legal claim to the assets to be effective.

Many people overlook this step or avoid it altogether, but you must give legal ownership of the estate to the trust for it to be effective. This process includes changing vehicle titles and real estate deeds and the names on financial accounts at various financial institutions.

5. Plan gifts carefully.

Instead of just writing a check to your heirs, come up with a way to maximize the impact of the gift you’re giving them. Cash is often spent quickly and thoughtlessly, while property is more likely to be held onto as an investment.

Also, keep taxes in mind when gifting. Tax-wise giving options are worth exploring as they can increase after-tax wealth.

6. Prepare, streamline, and organize.

One reason why it takes so long to settle an estate is that important documents are unorganized and none of the necessary information is easy to find.

The executor of the estate has to know all the details. Over time, it helps to simplify and streamline things as much as possible. Not only does streamlining make the process easier and less expensive, but it avoids lost assets and wasted time.

7. Put a business succession plan in place.

Many businesses don’t survive after the next generation takes over, largely due to the lack of a business succession plan. To ensure that a small business stays in operation after the owner passes away, a succession plan that designates who will run the business and who will own it is essential.

Who will take over is something that should be discussed ahead of time? If no one wants to take over, then the decision of whether or not to sell the business must be made. In this case, it’s important to manage the business as one that is ready for sale by making sure all the accounting and information systems are updated and that everything is as financially sound as possible. A business succession plan can take as long as five years to execute, and it must be put together thoughtfully.



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