An estate plan is an integral part of a comprehensive financial plan. Estate plans, in a nutshell, are designed to maximize control. These control issues (both financial and non-financial) present themselves “inter-vivos”, during life, and “post-mortem”, after death.  An effective estate plan focuses on the accumulation, conservation, and distribution of an estate. 

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Folks in the Denver/Lakewood, Colorado area may find it beneficial to utilize a CERTIFIED FINANCIAL PLANNER™ Professional for a more holistic approach to estate planning. The CERTIFIED FINANCIAL PLANNER™ Professional manages your overall financial plan including investment management, retirement planning and cash flow analysis.  A CFP® Professional also brings expertise in wills, trusts, powers of attorney and tax planning/asset protection strategies that can help ensure your assets will be transferred to heirs efficiently.

Here’s a step-by-step estate planning checklist.

Distributing Your Assets

1. Inventory your assets

A chief goal of estate planning is to grant you the ability to distribute what you have, to whom you want, in the way that you want, with the least amount of administrative expense and tax burden. The first step is to have a clear picture of the assets you currently possess.

To that end, it is important to inventory your assets. These can include:

• Investments
• Retirement funds, such as 401(k)s or IRAs 
• Real estate property
• Personal possessions (cars, jewelry, clothing, furniture)
• Life insurance

2. Choose your beneficiaries and the assets you wish them to receive

Once you have a full list of your assets, choose your beneficiaries. You may want to consider your family members, friends, and any organizations.  Then decide which assets you want to leave to each beneficiary and in what order.

Note that retirement accounts such as IRAs and 401(k)s, require beneficiaries to be named. As part of this process, review the beneficiaries on these accounts to make sure they match your desired plan. Update if necessary. 

3. Consult an estate planning attorney

There are two common techniques that outline the distribution of your assets after your death: 1) A Last Will and Testament and 2) a Living Trust.

A Last Will and Testament names individual beneficiaries and disposes of probate property at death to these named beneficiaries. 

Last Will and Testaments are assessed in Colorado probate court prior to the actual disbursal of the assets to desired beneficiaries. Probate is a process in which court officials assess the validity of the Will and the value of the estate. If you have debts and do not make provisions for settling them in your will, probate officials can deduct the value of the debts from your estate. 

Probate can be a lengthy process, and can leave your heirs without financial resources that you want them to utilize throughout this process. This is why using a living trust may be beneficial. 

A Living Trust is like a Will in that it specifies your beneficiaries and names the assets you want each to receive. The primary difference is that a Living Trust holds possession of your assets. The Trust does not go through the probate process after your demise, and thus can settle your estate more efficiently. 

A revocable Living Trust leaves the assets within your control and can be used for your benefit during your lifetime. At death the trust distributes these assets to your designated beneficiaries. 

It’s prudent to discuss potential strategies to minimize tax and administrative costs with your financial advisor. It’s important to know that both a will and a living trust are legal documents that should be prepared by an attorney.

4. Have your estate planning attorney draft your legal documents 

Once you have decided the course of action have your estate planning attorney draft the documents.  

Keep your document(s) in a safe place. 

5. Update your beneficiaries periodically

While we often associate wills and trusts with older age, it’s a good idea to have one throughout your life. People who die without a will (intestate) potentially leave their beneficiaries facing an even more lengthy probate process – and potentially interfamily strife over the disposal of assets.

 It is important to review your estate plan regularly, especially if your life or the lives of your beneficiaries have changed. Major life events such as marriage, the birth of a child or grandchild, or a beneficiary reaching the age of majority may require updates to your estate plan.

6. Review life insurance needs 

Life insurance can provide your estate with liquidity to accomplish specific goals within your estate plan. It can give beneficiaries the means to be financially stable after your passing. It is important to discuss these matters with a financial advisor. 

Providing Care If You Become Ill or Incapacitated

7. Establish a medical power of attorney

What happens if you become too ill or incapacitated to give guidance on your own healthcare treatment? Providing a medical power of attorney will ensure that the person you designate to hold that power can make medical decisions for you. In Colorado, these people are often called guardians or in some cases healthcare surrogates.

The first step here is to determine your medical objectives. For instance, do you want your healthcare professionals to take extraordinary steps to prolong your life? 

Then, decide upon the person you would like to designate as your medical power of attorney. You will want to confirm that the people you pick are willing and able to act on your behalf.    

8. Establish a financial power of attorney

Individuals who become ill or incapacitated also need someone to handle their finances – everything from paying monthly bills to ensuring that a financial power of attorney provides access to any available funds for their care.  

A financial power of attorney can help to address these issues. It is analogous to a medical power of attorney, but it only deals with your finances. 

After determining the person or agent to whom you would bestow these financial powers, identify the specific financial powers you would like them to hold on your behalf. For example, should they have access to liquidating your assets to pay for care; or to your bank account for paying monthly bills?

Both financial and medical powers of attorney can be placed in force immediately. They can also be springing powers of attorney where they only become active when certain circumstances arise in the future. Decide which you prefer as you review your objectives with your financial advisors, attorney and designated individual(s).

An estate plan is a crucial component of a financial plan. The CERTIFIED FINANCIAL PLANNER™ Professionals and Certified Estate Planners™ at The Normandy Group offer serious financial planning for today’s complex world.  By combining tax, financial, and estate planning strategies we can help you achieve your goals. Contact us today for a complimentary consultation.

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