As the year draws to a close, it’s the perfect time to ensure your estate plan is in order. For many, estate planning is a topic that’s easy to push aside. However, taking action now can prevent headaches down the road and ensure that your hard-earned assets are distributed according to your wishes. At Foundational Wealth Partners, we believe in helping individuals and families protect their financial future. Here’s a step-by-step guide to finalizing your estate plan before year-end to safeguard your assets and avoid probate delays.
1. Review and Update Your Will
Your will is one of the most critical components of your estate plan, outlining who will inherit your assets and how your estate will be managed after your death. However, life events—such as marriage, divorce, the birth of a child, or the death of a loved one—can make an existing will outdated.
Why it’s important:
Failing to update your will can result in unintended beneficiaries or disputes among heirs. By reviewing your will annually, especially at year-end, you can ensure it reflects your current wishes.
Action Step:
Take a close look at your will to confirm all assets are accurately accounted for, and that the named beneficiaries and executors still reflect your intentions. If any changes are needed, work with a qualified estate planning attorney to make these updates.
2. Establish or Revisit Your Trust
Trusts can offer significant benefits, such as avoiding probate, maintaining privacy, and providing clear instructions for how your assets should be distributed. A revocable living trust is one of the most common tools used to bypass the costly and time-consuming probate process, ensuring a smooth transfer of assets.
Why it’s important:
Assets placed in a trust don’t go through probate, meaning your family can access them more quickly. Additionally, a trust can provide for specific distributions, such as ensuring funds are available for minor children or special needs family members.
Action Step:
If you don’t have a trust in place, now is the time to consider establishing one. If you already have a trust, review it to ensure it reflects any changes in your family or financial situation. Also, make sure all relevant assets are properly titled in the name of the trust.
3. Verify Your Beneficiary Designations
Many financial accounts—such as retirement plans, life insurance policies, and annuities—allow you to name beneficiaries. These designations take precedence over your will, so it’s essential to ensure that they are up-to-date, especially if you’ve experienced major life changes like marriage, divorce, or the birth of a new child.
Why it’s important:
Outdated beneficiary designations can result in assets going to the wrong person, even if your will states otherwise. Additionally, failing to name beneficiaries can leave assets tied up in probate.
Action Step:
Go through each account and verify that the beneficiaries listed are still accurate. Ensure that both primary and contingent beneficiaries are specified to avoid any delays or disputes in the event of your passing.
4. Consider Tax Implications and Gifting Strategies
The year-end is an excellent time to consider tax-efficient ways to manage your estate. If your estate’s value exceeds the federal estate tax exemption, which is currently $12.92 million for individuals (as of 2023), you may want to explore strategies for reducing your taxable estate. One effective approach is gifting assets to your heirs while you are still alive, which can reduce the size of your estate and minimize potential tax liabilities.
Why it’s important:
Making financial gifts now can help reduce estate taxes in the future, and under current tax law, individuals can give up to $17,000 per recipient annually without triggering gift taxes.
Action Step:
Work with your financial advisor or estate planner to determine if gifting is a viable strategy for you. You should also be aware of any upcoming changes in estate tax law that could affect your estate plan in 2024 and beyond.
5. Ensure Powers of Attorney Are in Place
Estate planning isn’t just about what happens after you pass away—it also involves making sure your wishes are respected if you become incapacitated. Powers of attorney for both healthcare and financial decisions allow someone you trust to make important decisions on your behalf if you are unable to do so.
Why it’s important:
Without these documents, your family may face legal challenges when trying to manage your medical care or finances if you’re unable to make decisions yourself. Ensuring that these powers of attorney are up to date can give you peace of mind knowing your affairs will be handled according to your wishes.
Action Step:
Review your medical and financial powers of attorney to ensure the individuals you’ve designated are still capable and willing to act on your behalf. If necessary, update these documents with the help of your estate planning attorney.
Final Thoughts
Taking the time to review and update your estate plan before the year ends is one of the best gifts you can give to yourself and your loved ones. Not only will it ensure your assets are protected, but it will also provide clarity and reduce the risk of disputes among heirs. At Foundational Wealth Partners, we’re here to help guide you through the estate planning process, ensuring your financial legacy is secure.
Get in touch with us today to schedule a consultation and start your year-end estate planning review.
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