List what you have
Make a list of your assets; include all financial accounts, real estate, businesses, and valuable possessions. Take into consideration your budget and what you'll need to live yourself; what is likely to be left over?
Your unique mix of assets will determine the best course of action for each asset type. You’ll have to consider what is part of your taxable estate, what is likely to go through probate (and if you can take action to avoid it), as well as the total value of your taxable estate.
Considering all your assets and the best way to treat each one can be complex; working closely with your attorney or tax advisor is recommended.
Learn about your assets
For each of the major asset types you own, find more details on how they can be handled in an estate and avoid common mistakes.
Investment accounts
Keeping transfer on death designations up to date is the key to passing on investment accounts.
Cash and bank accounts
Although cash may have the advantage of liquidity, it may require extra planning to minimize taxes.
Retirement accounts
Timing and taxation of distributions are especially important when passing on retirement accounts.
Real estate and other valuables
Real estate is a commonly bequeathed asset, which is subject to its own legal restrictions.
Succession planning for businesses
Owning your own business has unique implications for estate planning.
Consider life insurance
Life insurance through an estate plan can be an efficient way to transfer your wealth to your beneficiaries. There are two types of life insurance: temporary life insurance, such as term life insurance; and permanent life insurance, such as whole life insurance or universal life insurance. Term life insurance enables you to protect your dependents for a specific period of time in the event of your premature death by providing resources to cover debt obligations and your lost income. Permanent life insurance covers you for your lifetime. One way to incorporate permanent life insurance into your estate plan is through a properly established irrevocable life insurance trust that allows for the proceeds to transfer to your beneficiaries upon your death without estate taxes. Under current law, both temporary and permanent life insurance proceeds are transferred income tax-free to your beneficiaries.
Permanent life insurance with an irrevocable life insurance trust can be an efficient and effective way to transfer your wealth and leave a legacy to your heirs, while term life insurance can be used to replace lost income in your working years in the event of your premature death. As mentioned previously, working closely with your attorney or tax advisor is recommended.
