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How to Make an Estate Plan to Control Your Asset Transfer

Estate Planning

Written By Doug Mitchell

Doug Mitchell, CLU holds a BA degree in Finance from Auburn University as well as having obtained a Chartered Life Underwriter (CLU) designation from The American College in Bryn Mahr, PA.  Doug has spent close to 30 years in the insurance and financial planning industry and has held licenses to sell securities, long-term care insurance, health.  Doug is also a financial blogger addressing the topics of life insurance, annuities and retirement income planning.

Holly Mitchell  &

Holly Mitchell’s background in life insurance insurance goes back to 1985 when she worked for her father who was a New York Life agent. Holly has a marketing degree from Auburn University and has had a life insurance license since 2008. In addition to advising life insurance for customers all around the country, Holly is our website fact checker.

Rob Pinner   &

Rob Pinner is the founder and CEO of Pinner Financial Services servicing all 50 states. Rob started his insurance career in 2002.

Louis LaBash

Results-driven and innovative life insurance professional with 30 plus years of life insurance industry sales and marketing experience. Recognized as a pioneer in the field, leveraging phone and internet channels to exceed personal sales of over $100 million during the first decade of the 21st century. Creator of a highly effective intuitive IUL life insurance sales software that facilitated the sale of millions of dollars of indexed universal policies by numerous life insurance agents. Proven track record as a Managing General Agent (MGA), Life Agent, IUL Life Insurance Sales Software developer, and leading-edge creator of insurance marketing tools, educational content, and delivery systems.

Table of Contents

Antiquated terms like “estate planning” can make your financial life unnecessarily confusing.

An “estate” sounds like something grand — a spread of land surrounded by a fence in the country or a high-rise apartment building in the city.

In reality, we all have estates. They’re comprised of everything we own minus what we owe in debt and taxes.

What would happen to your estate if you died? Estate planning exists to help you answer that question.

Let’s take a closer look.

Your Estate Plan or Someone Else’s?

Even if you’ve never given your estate a second thought, you already have an estate plan. Your plan is provided courtesy of your local and state probate laws.

The probate’s office will liquidate your assets, pay off your creditors, and then settle up with local, state, and federal tax authorities.

After that, the probate’s designated estate manager — hopefully a close friend or someone in your family — will divide the remaining assets as he or she sees fit.

The probate court’s plan has some obvious drawbacks:

  • It Takes Time: Nothing moves quickly at the courthouse. You could wait months or even years for the probate court to settle your estate and distribute assets to your heirs.
  • It Doesn’t Reflect Your Values: You know your heirs better than the probate judge knows them. Your own plan can reflect your values and can allocate your resources accordingly.
  • It’s Very Public: Anyone can access your county’s probate records and try to claim some of your property.

Creating Your Own Estate Plan

Most people, naturally, want more control over how their estate assets will be divided after death. An estate plan offers this kind of control.

You should create a plan as soon as possible.

It sounds ominous and overly dramatic, but it’s also true: None of us know how soon we’ll need an estate plan.

Young adults need an estate plan, especially if they have children. Even people with fewer assets need a plan.

In fact, you could make a case that people with less wealth have more to lose if their estate goes into probate.

A Will Is Important But Not Enough

Making a will is a good first step, but a will alone won’t protect your assets from government decisions. A will serves to communicate your wishes but it won’t keep your assets out of probate.

To avoid probate altogether, many professional estate planners recommend a revocable living trust.

When you put your assets in a living trust, the trust becomes the owner of your assets. As a result, your death does not require your local probate court to manage your assets. Instead, you can name a trustee who will oversee your estate.

The trustee you select will decide how and when to distribute the trust’s assets. Presumably, your trustee will follow your wishes, which will reflect your values.

Trusts Can Help Before Death, Too

We tend to associate estate planning with death, but other events can set your plan into motion. If you become disabled or incapacitated in a way that prevents you from making decisions, your estate plan can take control.

How your estate is operating can even have an impact on what types of benefits or insurance you can access, like long term care policies or medicare/medicaid.

Not having an estate plan would, once again, put the probate court — or a variety of probate courts if you own property in more than one jurisdiction — in charge of the situation.

Some people, as they age, shift responsibility for their estates to a trustee to relieve themselves of the need to manage the estate’s details. However, you’d still have the right to change the details of your trust at any time.

In fact, you should change the details of your estate plan as time passes. We’ll get into that below.

Working With Attorneys and Tax Advisors

An attorney who specializes in estate planning can be a valuable ally as you plan your estate. A tax advisor can also provide some valuable guidance.

Despite attempts at reform over the years, estate taxes continue to erode assets you’d like to transfer to your heirs or other beneficiaries. A tax advisor can help you find legal solutions to limit exposure to taxation.

Even when you have professional help, you should still control the process. Sometimes professional estate planners default to their own preferences and habits rather than incorporating your wishes. You should know what’s going on at all times with your estate plan.

Using Your Plan to Reflect Your Values

We’ve already referred to the importance of sharing your values through your estate plan, but we haven’t included any specifics yet. Your own estate plan can:

  • Redirect Assets: If your immediate heirs don’t need your assets and you’d like to direct them elsewhere, a living trust can help. For example, some people want their estates to fund a scholarship to honor or remember someone special. Others are big into charitable donations or giving back to alumni associations.
  • Delay Distribution: Maybe your heirs aren’t quite ready to inherit the bulk of your estate. You could direct your trustee to retain the funds until your heirs reach a specific age. Or your trustee could invest the money on your heirs’ behalf until a certain date.
  • Exclude Someone: It may sound petty to an outsider, but you know your family better than anyone. Maybe one of your heirs has already accumulated a lot of wealth and you’d rather distribute your estate to your heirs who need it the most. The point is, you get to decide.

Not All Assets Require Probate

Estate planners make probate sound like purgatory for good reason: probate courts can hold up your estate and complicate simple procedures.

But not every estate is large enough to require the involvement of your local government. Since laws vary widely across the country, you may want to find out how your county or parish decides when to get involved.

The safest bet, of course, is to make your own plan, especially considering the way laws can change over time. Also, some assets are built to avoid probate: a life insurance death benefit or an annuity with a stated beneficiary, for example.

You can also direct your IRAs or 401(k) funds to benefit your spouse or someone else, avoiding the process of liquidation and redistribution.

However, if you don’t have valid beneficiaries, these kinds of assets would still be funneled through your estate plan.

Estate Planning for the Budget Conscious

Yes, we all have estates, but all our estates aren’t created equally.

If you haven’t accumulated wealth beyond your current bank account balance and the equity in your home or cars, you can still benefit from estate planning. In fact, you may have the most to gain by planning your estate.

You may not need to hire a designated estate planner or name a trustee just yet, but you should still take some action.

Get a Term Life Insurance Policy

A term life insurance policy can provide a significant source of money at your death to pay debts, cover final expenses, and create a more stable financial situation for your surviving family.

Your life insurance beneficiary can decide how to distribute, save, or invest your life insurance payout.

If your beneficiary dies before you, and if the life insurance company can’t find another valid recipient, your payout could enter probate just like other assets.

This could be an issue if you named your spouse as your policy’s beneficiary and then you and your spouse both die in the same accident.

However, if you’re planning beyond a certain time period, and you’re married, your plan may be complex and require other types of life insurance, like a single premium or a survivorship policy.

Designate Powers of Attorney

To avoid this scenario, you should appoint someone as your designated decision-maker. The court system calls these designees your powers of attorney.

  • Financial Power of Attorney: This person can decide how to distribute your life insurance payout and any other assets you’ve accumulated.
  • Health Care Power of Attorney: This person can make sure doctors follow your wishes about end-of-life care such as whether to remain on life support or donate organs.

You’ll need a lawyer to help you designate powers of attorney. You can find cheaper legal services online, but something this important is worth a couple hundred dollars in legal expenses for most people.

Choose Guardians for Your Children

Your estate plan should also address the needs of your young children:

  • Who would become your children’s guardians if you and your partner died?
  • How would these guardians afford to pay for your children’s current and future expenses?

You can answer these questions through your estate plan. Specifically, you can create a will, designate powers of attorney, and get enough life insurance coverage to fund these plans.

Life insurance helps create an elegant solution to the funding question because the resources you’ll use don’t exist unless they’re needed. In other words, the problem (your death) creates its own solution (your life insurance payout).

Over time as you earn more and save more, you can rely less on life insurance and more on your own assets to fund your wishes.

Keeping Your Estate Plan Updated

Once you have an estate plan in place, take a deep breath and soak in the sense of peace you’ve earned by doing what you can to control the future of your estate.

But don’t get too complacent. Your estate plan should always reflect your life.

Since your life will continue to change, you may have to update your estate plan to accommodate:

  • Changes in Assets: Maybe you’ve earned a lot and accrued more property since making your initial estate plan. Make sure your living trust includes everything you’d like included.
  • Changes in Family: If your children are grown now, your estate plan should reflect this reality. They probably don’t need the protections you initially included in the plan.
  • Changes in Trustees: The person you named trustee a decade ago may have moved away and you’ve lost touch. Or maybe you’re not so sure about that decision anymore. Or, maybe you now have an adult child who can fill that role. You can change your trustee anytime you need to.
  • Changes in Guardians: The same is true for potential guardians of your children. If you named your own parents a decade ago and now they’ve aged out of consideration, maybe you’d rather name a sibling or a friend.
  • Changes in Beneficiaries: Your life insurance beneficiaries — along with beneficiaries for your IRAs, 401(k)s, or annuities — should also change as needed over time. Your life insurance company, financial advisor, or employer can help with this.

The point is, your estate plan should change as your wishes change. Here’s an idea: Every leap year take a look at your plan and make any necessary changes.

You may want a more frequent trigger to make changes: Every birthday or every time the Olympics come on TV (which is every two years when you include Winter and Summer Games).

Making Your Documents Available

Your trustee, powers of attorney, or will executor will need access to your financial documents after you die. You can make it easier for your survivors to follow your wishes by having all your documents in one place, including:

  • Your will and trust documents.
  • Your life insurance policies.
  • Deeds to your home or other real estate you own.
  • Certificates for your stocks and bonds.
  • Passwords to your bank accounts (don’t save these on your computer).
  • Your computer password.
  • Tax documents, especially for recent years’ taxes.
  • Account numbers for your utilities and any debts.
  • Information about any funeral arrangements you’ve already made.

You can use a safe deposit box at a bank or a safe in your home. Just be sure your executor or trustee knows where to start looking for your documents in advance.

Life Insurance And Estate Planning: We Can Help

Whether you’re a multi-millionaire or someone who’s just trying to get through the month, you should have a say, and your financial wishes should be honored after you die.

An estate plan gives you the most control. No matter how much you earn, how much you own, or how old you are, leaving some kind of directions will make life easier for your heirs.

A revocable living trust will be a must if you own property, investments, and cash and you’d like to have the most control over how they’re distributed.

An irrevocable trust might be a better option if you have minors and you want to control how assets might be spent before they become the age of majority.

If you’re younger and depend on life insurance to leave a legacy of stability, be sure you have powers of attorney and up-to-date beneficiaries.

And if you need life insurance quotes, let us know. Our independent agents have the expertise to connect you with a policy to meet your specific needs.

Doug Mitchell, CLU

Doug Mitchell, CLU

Doug Mitchell, CLU holds a BA degree in Finance from Auburn University as well as having obtained a Chartered Life Underwriter (CLU) designation from The American College in Bryn Mahr, PA. Doug has spent close to 30 years in the life insurance and financial planning industry and has held licenses to sell securities, long-term care insurance, health. Some other notable items about Doug: Top of the Table Million Dollar Round Table member (MDRT). (MDRT is a global, independent association of the world’s leading life insurance advisors) | Premier Partner with Lincoln Financial and Cabinet Member | Served two years as President of the Auburn/Opelika Association of Financial Advisors | Life Millionaire status at Horace Mann Insurance Company and was awarded the Life Agent of the Year Award | New York Life, Executive Council Member | Currently serves as President of Ogletree Financial, a life insurance General Agency. | Doug is also a financial blogger addressing the topics of life insurance, annuities and retirement income planning.

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