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  • Writer's pictureZSS CPAs

Estate Plan Building Blocks

Updated: Apr 25

You may be convinced that you need an estate plan, but you're fuzzy about what it covers and even how to make one. One great place to start is to determine your net worth. Add up rough estimates of the values of your assets, including bank and investment accounts, jewelry, collectibles, cars and boats, as well as retirement plans. Don't forget the death benefit from your life insurance. Add to that any business interests or money owed to you and, of course, real estate.

Subtract liabilities—credit card debt, car and other personal loans and mortgages. The estate plan you design can protect property for your children, keeping away predatory creditors and any problems due to remarriages or divorces. You want to give your children the tools to grow your assets and benefit your family for generations. You're sold—but what does it look like? It includes the following:

  • A will, in which you state who you want to inherit your property and name a guardian to care for your young children should something happen to you and the other parent.

  • A trust that holds your property—a living trust—so your survivors won't have to go through probate court, a time-consuming and expensive process.

  • Health care directives that share your wishes for health care to protect you if you become unable to make medical decisions for yourself. Here, we're talking a living will and a power of attorney for health care. Together, these are called an advance health care directive.

  • A financial power of attorney that gives a trusted person authority to handle your finances and property if you become incapacitated and unable to handle your own affairs.

  • Naming an adult to manage any money and property your minor children may inherit from you, to protect your children's property.

  • Beneficiary forms that name beneficiaries for bank accounts and retirement plans so that these accounts automatically pay on death. In almost all states, you can register stocks, bonds and brokerage accounts to transfer to your beneficiaries as well.

  • End-of-life wishes that detail organ and body donation and disposition of your body—burial or cremation.

Now you may be wondering about how to deal with your business—can this be part of an estate plan? Yes, you should have a succession plan that may include a buyout agreement. And what about storing the documents included in your estate plan? You'll want your executor and attorney to have access to these documents, and make sure information about bank accounts, mutual funds and safe deposit boxes is available, as well as real estate deeds, certificates for stocks, bonds and annuities, retirement plans, 401(k) accounts and IRAs. It's a great help to survivors to make it easy for them to know where to find relevant documents.

You also may be wondering whether and where estate taxes fit into your plan. You'll be happy to discover that most estates—99.7%—won't owe federal estate taxes and that estate taxes kick in only if your taxable estate is worth more than $11.4 million. And married couples can transfer up to twice the exempt amount tax free. There still may be state estate and inheritance taxes, which may have different floors.

This is just an introduction to a complex topic. Let us walk you through all the choices you need to make to create the right estate plan that works for you and your loved ones when it's needed.

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