Estate Planning Checklist: A 7-Step Guide - NerdWallet (2024)

1. Create an inventory.

2. Account for your family’s needs.

3. Establish your directives.

4. Review your beneficiaries.

5. Note your state’s estate tax laws.

6. Weigh the value of professional help.

7. Plan to reassess.

• Homes, land or other real estate.

• Vehicles including cars, motorcycles or boats.

• Collectibles such as coins, art, antiques or trading cards.

• Other personal possessions.

» MORE: Why asset appraisals can be crucial

• Checking and savings accounts and certificates of deposit.

• Stocks, bonds and mutual funds.

• Life insurance policies.

• Retirement plans such as workplace 401(k) plans and individual retirement accounts.

• Health savings accounts.

• Ownership in a business.

» MORE: Try our home value calculator

• Write a will if you don’t already have one. There are even ways to create a will online.A handwritten will (called a holographic will) may not be enough or valid in your state.

• Ensure you have enough life insurance. If your next question is "How much life insurance do I need?" it depends on factors such as whether you're married or if your current lifestyle requires dual incomes. Life insurance is especially important for those who have dependent children.

• Name a guardian for your children — and a backup guardian, just in case — when you write your will. This can help sidestep costly family court fights that could drain your estate's assets.

• A trust might be appropriate. With a revocable living trust, you put your assets into a trust and select a trustee to manage the assets for your benefit (and that of your beneficiaries). If you become ill or incapacitated, your selected trustee can take over. Upon your death, the trust assets transfer to your designated beneficiaries, bypassing probate, which is the court process that may otherwise distribute your property. There's also the option to set up an irrevocable trust, which can't be changed or revoked by the creator.

• A medical care directive, also known as a living will, spells out your wishes for medical care if you become unable to make those decisions yourself. You can also give a trusted person medical power of attorney for your health care, giving that person the authority to make decisions if you can't. These two documents are sometimes combined into one, known as an advance health care directive.

• A durable financial power of attorney allows someone else to manage your financial affairs if you're medically unable to do so. Your designated agent, as directed in the document, can act on your behalf in legal and financial situations when you can't. This includes paying your bills and taxes, as well as accessing and managing your assets.

• A limited power of attorney can be useful if the idea of turning over everything to someone else concerns you. This legal document does just what its name says: It imposes limits on the powers of your named representative. For example, you could grant the person the power to sign the documents on your behalf at the closing of a home sale or to sell a specific stock.

• Be careful about who has your power of attorney. They may literally have your financial well-being — and even your life — in their hands. You might want to assign the medical and financial representation to different people, as well as a backup for each in case your primary choice is unavailable when needed.

»MORE: What you need to know about getting a power of attorney

• Check your retirement and insurance accounts. Retirement plans and insurance products usually have beneficiary designations that you need to keep track of and update as needed. Those beneficiary designations typically outweigh what's in a will.

• Make sure the right people get your stuff. People sometimes forget the beneficiaries they named on policies or accounts established many years ago. If, for example, your ex-spouse is still a beneficiary on your life insurance policy, your current spouse might get none of the policy's payout after you're gone.

• Don't leave any beneficiary sections blank. In that case, when an account goes through probate, it may be distributed based on the state's rules for who gets the property.

• Name contingent beneficiaries. These backup beneficiaries are critical if your primary beneficiary dies before you do and you forget to update the primary beneficiary designation.

» Dig into the differences: Revocable vs. irrevocable trust

• At the federal level, only very large estates are subject to estate taxes. The federal estate tax ranges from rates of 18% to 40% and generally only applies to assets over $12.92 million in 2023 or $13.61 million in 2024. What if you have an estate that surpasses the federal limits? You may want to consider a grantor retained annuity trust, or GRAT, a type of irrevocable trust that can help reduce the amount of taxes your heirs pay.

• Some states have estate taxes. They may levy estate tax on estates valued below the federal government’s exemption amount. (See which states have an estate tax here.)

• Some states have inheritance taxes. This means that the people who inherit your money may need to pay taxes on it. (Learn more about inheritance tax here.)

• If your estate is small and your wishes are simple, an online or packaged will-writing program may be sufficient for your needs. These programs typically account for IRS and state-specific requirements and walk you through writing a will using an interview process about your life, finances and bequests. You can even update your homemade will as necessary.

• If you have doubts about the process, it might be worthwhile to consult an estate planning attorney and possibly a tax advisor. They can help you determine if you're on the proper estate planning path, especially if you live in a state with its own estate or inheritance taxes.

• For a large and complex estate — think special child care concerns, business issues or nonfamilial heirs — an estate attorney and/or tax professional can help maneuver the sometimes complicated implications.

• Revisit your estate plan when your circ*mstances change, for better or for worse. This may include a marriage or divorce, the birth of a child, the loss of a loved one, getting a new job or being terminated.

• Revisit your estate plan periodically even if your circ*mstances don’t change. Although your situation may be the same, laws may have changed.

• It will take some effort to revise your plan, but take heart. The need to revise means you’ve already avoided the biggest estate planning mistake: never drafting a plan at all.