The 7 Step Estate Plan (Video)
An estate planning system makes sure your plan do what you expect it to do, not what you think it does.
If you search on the internet for how to create an estate plan or the steps to estate planning, you’ll find that the articles talk about creating the documents.
This is literally putting the cart ahead of the horse. There are several steps to go through before creating and signing the documents.
Let’s talk about the 7-step planning system.
Step 1 – Take Action
It is better to get started with an estate planning system than to let this sit as something to get done later. You can make changes and fine tune the plan later.
If something were to happen tomorrow – an auto accident, household mishap, or medical incident – and leave you unable to make decision, your family will pay the price and face the problems.
Commit to creating your estate plan just as soon as possible or your family will pay the high price financially and emotionally. If you don’t act, State law will decide who makes decisions if you can’t make them yourself. State law will decide who gets your estate, how much, when, and how.
Estate Planning Step 2 – Pick Your Goals
Different people have different goals. An estate planning system narrows and focuses your efforts.
- Avoid Probate
- Protect Assets
- Protect Family
- Maximize Inheritance
- Prepare for Long Term Care
- And More…
Step 3 – Decide Who Decides
You need to pick somebody you know and trust to manage for you when you can’t mange for yourself.
This happens in two cases
First is when you are unable to make decisions because you’ve had an accident, medical incident, or other mishap that leaves you unable to make decisions. It is extremely important that you have somebody picked ahead of time to make decisions. If you don’t, then your family will be forced to court to get a Judge to pick somebody to make the decisions for you. You can plan on that trip to court costing about $3,500. You can create a comprehensive plan to avoid court for about $675.
Second is when you’re gone. You need to pick somebody you know, like, and trust to manage and distribute your property..
Estate Planning Step 4 – Take Inventory
It is important that the loved ones you leave behind know what you had and what you owe. They will have to deal with both parts of it. Part of settling an estate is paying off debts. The other part is distributing assets.
Don’t forget to include intangible assets. If you have a patent, book rights, and other things, they need to be included.
Step 5 – Decide Who Gets What, When, How, and How Much
You get to decide who gets what, when, how, and how much instead of the State. If you don’t have a plan, then State law decides for you.
It’s not uncommon for me to tell step-children that they get nothing because mom or dad didn’t have a plan. By default, the State’s plan is for only blood or adopted children to inherit.
Estate Planning Step 6 – Decide on a Probate Avoidance Plan
An estate planning system is incomplete without a probate avoidance system.
You can decide to have nothing left. However, this is very difficult to do. But it is easy to have nothing left in your name. More on that in a moment.
The first plan we can do in Arkansas is called a Beneficiary plan. This plan depends on a beneficiary deed for your real estate and beneficiary designations for the rest of your property. For many people, it is the plan for them. It is fairly simple to implement and maintain. This plan also includes a Will for a safety net.
If you have family with special needs, addictions, marital issues, or complex distribution rules then you need a trust. We probably write 25% trusts and 75% beneficiary plans.
When you give money, real estate, or other property to your trust, you are taking that property out of your name and putting it in the name of the Trust. You are literally giving your property to the trust. Therefore, you don’t have anything left in your name. When you pass, the person you name takes over managing the assets in the Trust and follows the instructions.
Step 7 – Create the Documents
The last step is to create and sign the documents that cover the decisions made in the previous 6 steps.