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October 15, 2021

What is estate planning? A guide to understand the basics

What is estate planning? A guide to understand the basics

For many of us, we struggle to see estate planning as relevant. It’s human nature to focus on the here and now, while procrastinating on things like planning for the end of life. However, the key advantages of creating an estate plan include minimizing the probate process and related expenses, delays, and loss of privacy.

If you wish to maximize what you can pass to your survivors, and minimize the amount that goes towards taxes, this is important to consider as soon as you have assets or dependents. 

What is estate planning?

Estate planning is the process of designating who will handle your responsibilities during your life should you become incapacitated, and disposal of your assets and after your death. One priority of estate planning is to ensure beneficiaries receive assets in a way that minimizes estate tax, gift tax, income tax, and other taxes.

What happens if I don’t have an estate plan?

A recent survey showed that 68% of Americans do not have estate planning documents. If you die “intestate”—without a will (it even sounds icky), your state intestacy laws will dictate who gets what. In general, assets are distributed to spouses and children. If you’re unmarried, or have a nontraditional family, this might not be the way you want your estate allocated. Basically if you don’t have a will, your state will create one for you. Rather than leave this up to them, create a plan so your wishes are known.

The 3 steps to estate planning  

1. Catalogue your assets and liabilities

First, you’ll want to prepare a complete list of your assets and liabilities. You may not think you have much of an “estate,” but once you start taking inventory you may be surprised at what you actually have. This list will help the estate attorney know the potential estate size, estate tax liability, and identify planning opportunities for you. The more you can be prepared in advance, the less time you’ll pay the attorney to go through this with you (these rates range from $250 to $600/hour), so make sure you do your homework!

You should also think about what you want your legacy to be. Will you provide for children, grandchildren, or give to charities? Thinking through how you want to leave your legacy can also help save billable time. 

What makes up your estate graphic

2. Choose an attorney

Next, you’ll want to start interviewing estate attorneys. Ask your network of advisors (your tax person or finance manager, for example) for referrals. Most attorneys will meet with you briefly to discuss your needs and you can determine if you think the attorney is a good fit for you or if you should keep looking. You can also consider online estate planning companies like Trust and Will.

Complex estates with unique challenges—such as a high net worth, limited liquidity, or blended families (just to name a few)—may require a traditional estate attorney. However, if you have a simple estate plan you may be a good candidate for an online estate planning service. And you can save a lot of money this way (potentially thousands of dollars!).

For example, if you have a young family and you're just starting to accumulate wealth, you may be a good candidate for an online estate plan to make sure your family is covered. Either way, your estate attorney will review your specific situation and advise what type of estate documents you need. 

3. Update your beneficiary designations and asset titling

As part of your engagement with your attorney, they’ll advise you how to title your assets and you’ll need to take steps to make these updates yourself. Too often people forget to take this step after they’ve gone through the hard part of preparing the estate plan.

All that goes to waste (including the attorney fees) if you don’t implement their recommendations. You may also need to update your beneficiary designations for your retirement plans or life insurance policies to be consistent with your estate plan.

Lastly, take this opportunity to make sure you have enough life insurance to cover your survivors. 

It may be hard to prioritize preparing your estate plan, but the benefits to your survivors is inconceivable. Often survivors are left trying to figure out the decedent's assets and liabilities, organize their household, and at the same time grieve for their loss.

You can take steps now to help take care of your loved ones, and leave a legacy for generations.

Origin is a leader in holistic financial wellness. Schedule a meeting to learn how Origin provides personalized financial support to employees across the globe, including estate planning and advice.

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Heather Comella, CFP®
Lead Financial Planner