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How to Start Estate Planning in a Few Easy Steps Thumbnail

How to Start Estate Planning in a Few Easy Steps

By: Daniel Weitz, CFP®, CFA

Estate planning is often one of those things that people tend to put off for one reason or another. Maybe they don’t want to think about their own mortality, or they think it will be too expensive. Or maybe they just don’t think it’s necessary. In fact, over half of Americans have not done any estate planning.

But the consequences of failing to plan your estate can be devastating for your family and beneficiaries. If you don’t have a last will and testament, decisions about how to distribute your assets may have to be made by the court. In addition, your estate might have to go through probate, an unnecessary and expensive process. And if you haven’t drafted medical directives, your family members might not know how to make end-of-life care decisions.

These reasons and more make it critical to create an estate plan. The good news is that doing so might not be as complicated and time-consuming as you think it will be.

What is an Estate Plan?

Estate planning is the process of formally declaring who will receive your assets after you die and how medical and end-of-life care decisions will be made if you are incapacitated and can’t make them yourself. This is often done with help from an attorney, financial advisor, accountant, and other professionals. Drafting an estate plan will help ensure that your beneficiaries receive assets in a way that minimizes transfer taxes.

An estate plan usually includes the following documents: 

  1. Last will and testament
  2. Living will
  3. Living trust
  4. Durable financial power of attorney
  5. Limited power of attorney

When to Create or Update an Estate Plan

If you haven’t yet created an estate plan, the time to do so is now. The longer you put off estate planning, the greater chance that you could die or become incapacitated and not have a plan in place to ensure that your assets are distributed to heirs and end-of-life care decisions are made according to your wishes.

Meanwhile, if you have created an estate plan, there are certain moments and events in your life when you might need to update your plan. These may include the following:


When you get married, you will want to change all of your estate planning documents to reflect your new spouse. For example, you may want to name your spouse as your primary beneficiary in your last will and testament and primary decision-maker for end-of-life care decisions.


When you get divorced, you will probably want to do just the opposite: Remove your spouse as your primary beneficiary and decision-maker for end-of-life care decisions and name someone else instead.

Birth of a child (or grandchild)

You will need to update your last will and testament to include instructions for who will raise your child if you die before he or she reaches the age of majority. You may also want to add your child or grandchild to your last will and testament as a beneficiary.

Purchase of property

If you buy a major piece of property — like a new home or private aircraft — you may need to add this to your last will and testament and specify who will receive it after you die.

Large inheritance

The same thing goes for leaving behind a large inheritance: Be sure to update your last will and testament to specify who will receive these assets.

Drafting a Last Will and Testament

The last will and testament is the central estate planning document for most people. If you die intestate (without a will), your assets may have to go through probate, which will make the details of your estate public. And a judge will likely decide how your assets are distributed, which may or may not be what you would have wanted. Your last will and testament will:

  • Formally declare who will receive your assets and property after you die. A number of well-known celebrities, including Aretha Franklin, Prince and Jimi Hendrix — died intestate, which led to years of fighting and court battles among their heirs.
  • Assign legal guardianship for your minor children. This is important in case you and your spouse were to unexpectedly die at the same time.

Establishing Directives

In addition to making sure that your assets are distributed according to your wishes, your estate plan will also establish directives that provide instructions for end-of-life care. The three main directives are:

Living will

Also called a medical directive, this is the main estate planning directive for most people. A living will details how life-sustaining medical treatment decisions should be made if you’re incapacitated and can’t make them yourself. For example, if you were in a coma and the doctors said there’s no chance you’ll ever recover, would you want to be kept alive by machines? This is a decision you should make ahead of time, instead of leaving it up to your family members.

Durable financial power of attorney (POA) 

This directive appoints an individual, who is known as your designated agent, to manage your financial affairs if you are medically unable to do so. He or she will act on your behalf in any legal or financial situations that arise while you’re incapacitated. This includes paying any outstanding bills or taxes as well as signing legal documents on your behalf. You can revoke a durable POA if you recover and are able to make decisions again yourself.

Limited power of attorney (POA)

As the name implies, this directive places limits on the power of your designated agent when it comes to making decisions on your behalf. So, you could grant your agent the power to perform certain functions, like selling stocks or signing documents to sell your home, but not others. You might consider a limited POA if you don’t like the idea of giving someone else total authority over your financial decision-making.

Establish a Trust

Trusts can help ensure that the legacy you’re leaving behind is protected, as well as offer significant tax benefits since money held in trust bypasses probate. The main kinds of trusts are:

Living trust

Also known as a revocable trust, this allows for the transfer of assets for your beneficiaries into a trust without needing to go through probate. A living trust is often beneficial for individuals and families with large, complex estates and multiple beneficiaries. You will still be able to control and manage the trust assets while you’re alive. When you die, your trustee will ensure that all assets are transferred to your beneficiaries according to your wishes.

Irrevocable trust

Unlike a revocable trust, an irrevocable trust can’t be changed or revoked once it is established. You will surrender any and all ownership rights to assets once they are transferred into the trust. However, these assets are removed from your estate, which could help lower estate taxes and shield assets from creditors. This is why irrevocable trusts tend to be more common among professionals who face a higher risk of being sued, like doctors and attorneys.

Charitable trust

This trust is used to donate assets to one or more charities after you die. There are two main kinds of charitable trusts: a Charitable Remainder Trust (CRT) and a Charitable Lead Trust (CLT). With a CRT, the grantor will receive income from the trust until he or she dies (for up to 20 years) and then any remaining assets are transferred to the designated charity. A CLT is the opposite of a CRT: The designated charity will receive income from the trust for a certain number of years and any assets remaining after this time will pass on to heirs.

Consider Your Beneficiaries

Some property like 401(k) assets and life insurance death benefits can pass on to heirs without there being specific instructions in your last will and testament. Therefore, it’s important to maintain a list of beneficiary designations so these assets are distributed according to your wishes after you die.

If beneficiaries aren’t named for assets like these, or if a named beneficiary is deceased, a judge might have to make decisions about how the assets are distributed. It’s also usually a good idea to name contingent beneficiaries. And remember that beneficiaries should be 21 years of age or over and mentally competent.

Review State and Federal Tax Laws

Tax laws at the state and federal level can have a big impact on your estate plan, so be sure to review these as well.

Federal estate taxes

The federal gift and estate tax exemption is currently $12.06 million per person, or $24.12 million for a married couple filing a joint tax return. This means that if the total value of your estate is lower than this when you die (reduced by any taxable gifts made throughout your lifetime) it will not be subject to federal estate tax. If the value of your estate is higher than this when you die, it may be subject to an estate tax at a rate ranging from 18% to 40% on the amount that exceeds the exemption.

State estate taxes

In some states, estate tax is levied at the state level as well as the federal level. Find out whether your state assesses estate tax and, if so, factor this into your estate planning.

Inheritance taxes

Inheritance taxes are currently collected by only six states: Iowa, Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania. If a decedent lives in one of these states, his or her heirs may have to pay inheritance tax regardless of where they live. In other words, inheritance tax liability is based on where the decedent lived, not where the heirs live.

How A Financial Advisor Can Help

While estate planning involves lots of details and will take some time, this shouldn’t prevent you from creating an estate plan if you don’t have one. A Simon Quick advisor can answer your questions about estate planning and help you create a personalized estate plan that’s right for you. To learn more, call us at (973) 525-1000 or send an email to info@simonquickadvisors.com.

About Dan Weitz

Mr. Weitz joined Simon Quick in 2011 and is based in Morristown, NJ. As a Managing Director and Client Advisor, his focus is on providing investment and financial planning advice to high net worth individuals & families. Additionally, he works closely with endowments & foundations and regularly attends investment committee and board meetings. Mr. Weitz completed Fairleigh Dickinson University’s Financial Planning program and passed the CERTIFIED FINANCIAL PLANNER™ exam in 2009. He is also a Chartered Financial Analyst charterholder and member of the CFA Institute. Mr. Weitz holds a B.S. in Psychology from the University of Maryland and an MBA in Finance from Rutgers Business School. To learn more about Dan visit his LinkedIn.


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