Estate Planning Checklist: 4-Step Guide To Getting Your Affairs in Order
Estate planning is the process of coordinating who will receive and/or control your property upon your death or incapacity.
For most of my clients it’s a fairly straightforward process:
Compile a list of your assets
Figure out who should get what, including contingent or backup beneficiaries
Determine who can be responsible for administering your estate/trust
Making sure you’ve connected all the dots to make sure nothing falls through the cracks
Let’s discuss each step in turn:
Step 1: compile a list of your assets
Write down everything you own (assets) and everything you owe (liabilities/debt) to determine your net worth.
Your house, vacation house, rental properties, retirement accounts, checking/savings account, life insurance, annuities, and any other investment accounts you own will likely cover the bulk of your estate.
Cars and other tangible personal property are also helpful to note (as will be discussed further below), but don’t go crazy trying to figure out their values unless you think it’s material to your overall net worth.
Then add up the debt - for most this is going to be your mortgage on your home and perhaps a balance on a home equity line of credit or other loans associated with your properties/business/cars, if applicable. If you have credit card debt, but pay it off monthly then it’s probably not worth listing.
The list itself is helpful to making sure you aren’t missing anything, but if you live in Massachusetts then you’ll probably want to take the extra step of adding up your approximate asset values and subtracting out the debt to get your net worth. Don’t forget to include life insurance proceeds because the government won’t when trying to determine whether you owe estate taxes.
For those of you who live or are thinking of moving to New Hampshire (or Florida) you don’t have to worry about estate taxes unless you are over the federal level (12.92 million in 2023 ) but that number is expected to be cut in half effective January 1, 2026. However, there is one important caveat, which is if you own property physically located in Massachusetts (real estate), then they could still get you for Massachusetts estate tax purposes if your net worth is over the Massachusetts threshold (currently $1 million but expected to double if pending legislation passes) even though you are domiciled out of state.
Step 2: Figure out who should get what, including contingent or backup beneficiaries
For most married clients this will look something like, everything to my spouse and then equally among my children.
For unmarried, you may want to pick close friends, siblings, nieces or nephews, and maybe name some contingent non-profit beneficiaries just to be safe.
If anyone is under age or disabled, you probably don’t want to give the property to them outright because that could be messy - that’s one of the many ways where a trust comes into play.
Similarly, if you have a blended family scenario or if you’re wealthy (or both) you’ll probably want to add nuance in terms of how the beneficiaries are named and under what conditions they would receive the assets (whether outright or in trust for their benefit with income/principal distribution instructions further defined).
Clients typically will use percentages or fractions when dividing up their beneficiaries for simplicity, but if you have certain property that you want to specify goes to a certain person (or if you want to give preferential treatment in anyway) then you’ll do carve outs accordingly.
Step 3: Determine who can be responsible for administering your estate/trust
Who do you want to be your executor (personal representative), successor trustee, power of attorney for finances, and health care proxy?
The successor trustee can be the tricky part, especially if some of your beneficiaries are minors or not to be trusted with money outright.
For married couples, it’s typically spouses named first for everything and then one backup.
Adult children are ideal when they are the remainder beneficiaries so long as everyone gets along okay (once again, this could be an issue with blended families).
For young couples (in their 30’s), it’s not uncommon to name your parents in these roles, but I strongly advise you to do an extra backup if that’s the case and plan to update your documents again within the next 10 years as soon as a better choice emerges.
When considering who to pick for each role, close geographical proximity is a plus (particularly for your health care proxy) but in today's world it’s no longer a necessity. Trust is paramount and organizational/financial skills are secondary factors.
If you are stuck in choosing between two kids, you can name them as co-trustees, but be sure to specify if/when they can act independently (as opposed to jointly). For all other roles, it’s generally advisable to name one person at a time to serve in each role.
Step 4: Making sure you’ve connected all the dots to make sure nothing falls through the cracks
This is where the attorney comes in because you’ll need someone to draft the boring legal documents. For most clients this is the revocable living trust (joint or separate), durable power of attorney for finances, health care proxy (and advance directive in NH), and your pour-over will (safety net for the trust).
Certain items should be titled in the name of the trust, like real estate, while others can be assigned (like LLCs and most tangible personal property). Other accounts may be retitled into the name of the trust or simply have the death beneficiary designations (also known as pay on death “POD” or transfer on death “TOD”) to make sure things are flowing to the right people at the right time.
Each client's situation is very specific depending on your mix of assets and family circumstances, but your attorney (and your financial advisor, if you have one) can help you make sure it’s all connected so you can be absolutely certain that your wishes will be followed with the least amount of hassle/expense.
Need help with your Estate Planning?
If you would like to review or update your estate plan, then give me a call at 781 202 6368 (MA), 603 836 4166 (NH), email jlento@perennialtrust.com, or click here to schedule your free personal consultation.
I’m always happy to help!
Joseph M. Lento, J.D.
Your Local Estate Planning Attorney
www.PerennialEstatePlanning.com
Massachusetts Office:
477 Main Street
Stoneham, MA 02180
New Hampshire Office:
91 Middle Street
Manchester, NH 03101
