Estate planning can be an uncomfortable topic to address, but experts at the Pennsylvania Institute of Certified Public Accountants (PICPA) agree that it is one that should not be ignored. A properly formed estate plan is necessary to ensure proper growth of your assets throughout your life, execution of your wishes in times of illness, and distribution of your estate after your passing.
What Is an Estate Plan?
Before you begin the process of creating an estate plan, you should know what one entails and what professional help you should seek out. A good estate plan coordinates how to handle your investments, insurance, emergency, disability, retirement, and other assets while you are alive, in varying levels of health, and after your death. It can bring peace of mind to your family and loved ones, and can also help keep you on track to reach your financial life goals.
This financial planning process should be overseen by professionals who specialize in estate planning. Your estate planning team should include an attorney, certified public accountant (CPA), insurance consultant, and investment advisor or financial planner. When looking for professionals, consider soliciting recommendations from other professionals in a similar field. For instance, asking your banker if he or she knows a good CPA who specializes in estate planning. You should meet with your team annually if possible to review your documents and ensure that they are up-to-date with any recent changes in your life or the law and on track with your goals.
There are 12 steps to creating and maintaining a comprehensive estate plan. Although they can be accomplished in a different order than what follows, you may find it helpful to make organizing the first step you take. Also, remember that this is a process; a proper estate plan will continue to be changed and updated throughout your lifetime.
An estate plan includes the following steps and documents:
1. Organize all your important information and share it with your advisors. Be sure to provide people with your advisors’ contact information in case of an emergency.
2. Create a power of attorney by selecting someone to handle financial and legal issues for you when you cannot.
3. Create a health care proxy to allow someone to make health care decisions for you when you cannot.
4. Create a living will to communicate your healthcare wishes to others.
5. Protect your children and ensure that they will be cared for if you are unable.
6. Create a will to name executors and guardians, and to distribute your estate after you’re gone.
7. Create a revocable living trust to manage assets during a disability or illness. Unlike a will it can address planning while you are alive and healthy in addition to if you are disabled.
8. Ensure your insurance is in order. Review your coverage at least every two years.
9. File beneficiary designations and confirm the title to your financial accounts and estate. Keep copies and blank forms for potential revisions.
10. Give something back to thank those who have helped you and to demonstrate the importance of charity to your heirs.
11. Communicate your plans and wishes with your family and loved ones while you are still in good health. Prepare them and offer guidance, education, and clarification while you are able.
12. Review your estate plan frequently. It’s a process and life does not remain static.
A CPA Can Help
Now that you know what’s involved in planning for your life and your estate, get started. Organize your records, determine your goals, and contact your financial team. For more information and resources, visit www.360financialliteracy.org, or talk to your financial planner. To find a CPA in Pennsylvania by location or area of expertise, visit www.IneedaCPA.org.