5 Elements of a Well-Crafted Estate Plan

Scott Sirois |
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Soon after your son or daughter tosses a graduation cap into the air, it may be time to sit down for a slightly uncomfortable conversation about your estate plan. When your child was a minor, your plan named a guardian and provided for assets to support your children in case you were gone. Now that your child can live alone, it’s important to update the plan to talk about whether and how you want to distribute assets to children after you’re gone. Unfortunately, there is no easy way to conduct family conversations about finances, especially not estate planning. The reason is obvious: “Because feelings and money get tied up,” says psychologist Lisa Damour.

Before you sit down to work on your plan, take some time to consider your goals. Do you want to ensure your assets will be passed to the next generation and beyond? Are you worried one of your heirs will squander money left to him or her? Do you want to be charitable? Are you anxious about offending one of your heirs?

Though it’s tempting to use an online resource to create an estate plan, those questions can be difficult for most families. Experts including an attorney, a CPA, and a CERTIFIED FINANCIAL PLANNER™ professional can help guide you.

In the latest contribution to LetsMakeAPlan.org, CFP Board offers a guide to the elements of a well-crafted estate plan.

  • Will: Ensures assets are passed to designated beneficiaries, in accordance with your wishes. In the drafting process, you name an executor, the person or institution that oversees the distribution of your assets. If you have minor children, you need to name a guardian for them.
  • Letter of Instruction: This may appoint someone who will ensure the proper disposition of your remains. This sounds creepy, but it’s important if you choose a method of internment contrary to your family’s tradition.
  • Power of Attorney: Appoints someone to act as your agent if you are incapacitated. That person can act for you in a variety of circumstances, like withdrawing money from a bank, responding to a tax inquiry or making a trade.
  • Health Care Proxy: Appoints someone to make health care decisions on your behalf if you lose the ability to do so.
  • Trusts: Revocable (changeable) or irrevocable (not-changeable) trusts may be useful, depending on your family and tax situations. In 2017, the first $5,490,000 of an estate (twice that for married couples), is exempt from federal estate taxes. If an estate is above the threshold you may want to consider a trust.

As your child is graduating, you’ll want to offer a gift to mark the milestone. One of the most valuable you could offer is a well-planned estate, prepared with the help of a CFP® professional. Instead of untangling a mess when you’re gone, your heirs can follow concrete steps you’ve laid out for them, while they have the time and space to mourn.