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Estate planning: 5 tips to guide you

You’ve worked hard to build your portfolio and financial assets. But what about estate planning? This critical topic often ends up on the back burner because the time “doesn’t feel right.”

There are countless reasons why people avoid estate planning: I’m not wealthy, I’m too young, it’s too complicated, or simply, I don’t want to think about it. The truth is that by not putting your own plan in place, you have a “strategy” by default: the laws of your state. These tips can help you avoid common estate-planning missteps and ensure your plan works as intended.

1. Ensure core documents (such as a will or trust, power of attorney and health directives) are in place If you don’t have a will, a trust or some combination of the two, now is the time to get started:

  • A will provides direction for the distribution of your property at death. Importantly, it’s where you can name guardians for any minor children. Generally, a will is simple to put in place. But assets governed by a will pass through probate (the public process for asset distribution), which can be time-consuming.

  • Trust documents name a trustee to manage and distribute the trust’s assets. Your trustee can also provide management should you be unable to do so. Assets titled in the trust avoid probate, providing privacy. But you can’t name guardians in a trust, and drafting one is generally more expensive than with a will.

While most people need a will, not everyone needs a trust. Each situation is unique. When making your decision, think about your age, wealth/assets, need for guardians and privacy concerns.

The last few years have taught us that planning for a health crisis or incapacity planning is critical. Consider adding a power of attorney and heath care directive to your core documents. These allow you to designate who can make medical and financial decisions for you if you’re unable to do so.

2. Review asset titling and beneficiary designations One mistake you’ll want to avoid is holding assets that are titled differently from how your estate plan is designed. You might have established some accounts long ago but then never updated them to reflect your current situation. Also, many assets pass based on their beneficiary designations or asset titling rather than by the terms of a will or trust. It’s common to not review how your assets are titled or forget to update your beneficiaries after a life event such as a death, birth, move or divorce. Coordinating your asset titling with your estate documents will ensure your assets pass as you intend. Your financial advisor can help you review and, if necessary, update how your assets are titled and how they will pass at death.

3. Tell your loved ones where your documents are and how to access them The need to access estate, medical directive or incapacity planning documents often occurs suddenly. Make sure your loved ones know how to access them.

For example, many people keep important documents in a safe-deposit box or safe. In an emergency, you may not be able to give your loved ones this access. As a best practice, share with your loved ones any lock combinations, keys or authority needed to access these important documents.

While sharing this information is a personal decision, there are benefits to discussing your wishes now. This is your legacy. The more you share, the more your legacy can live on, fostering family harmony and limiting potential future conflict.

4. Don’t forget about digital access In today’s digital world, the most current access to your accounts may be online. Compile a comprehensive list of your account numbers and how to log in to them if necessary. Be sure to keep this list in a secure location.

5. Review your documents periodically It’s not uncommon to take a “one and done” approach with estate planning. But reviewing your documents periodically is just as important as setting them up.

Tax system changes, as well as changes in your personal situation, can impact how you would like to distribute your assets. A good practice is to review your estate plan every two to three years, or whenever there are significant changes to tax laws or your family structure.

How you can take action now An estate plan puts you in the driver’s seat regarding how your assets pass, who will care for your children and who can make decisions on your behalf. Your financial advisor can work with your tax, legal and estate-planning professionals to help ensure you have an estate plan that matches your goals.

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