5 Estate Planning Things You Need to Do Now, From a Financial Planner
Estate planning is essential for everyone. Completing these five key tasks right away can protect your family and their inheritance from potential high taxes and the probate process.
Everyone wants an estate plan, but not everyone has one.
Sadly, a recent Caring.com survey indicates that more than 50% of Americans are likely to die without an estate plan.
In my opinion, everyone age 18 and up should have a basic estate plan in place.
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Here are five key tasks you should complete right away to safeguard your family.
1. Designate health care and financial powers of attorney
One of the main reasons everyone should have an estate plan in place is to ensure someone is designated to make health care and financial decisions on your behalf if you become incapacitated.
2. Choose beneficiaries on your IRAs and 401(k)s
If you do not have beneficiaries on these accounts, then they will go to probate. And probate can cost 4% to 7% of an estate, so if you don't want your family to pay tens, or even hundreds, of thousands of dollars in legal fees, you need to plan to avoid this.
Designating beneficiaries is an easy and quick fix. Just make sure you update them if your beneficiaries pass or your plans change.
3. Put in place transfer on death (TOD) designations
If you have nonqualified assets, like a house or a joint investment account, then you will want to make sure it is either titled to a trust or has a transfer on death (TOD) designation in place (if your state allows it).
A trust or TOD allows your assets to pass without having to go through the probate process. This is something many people often neglect to do.
4. Implement tax planning strategies
An estate plan goes far beyond the documents listed above. Good estate planning, in my mind, involves being tax-smart and proactively positioning your assets to keep Uncle Sam out of what you have accumulated over all these years. I feel so strongly about this topic that I wrote a book about it — I Hate Taxes (request a free copy).
It is important to understand tax-efficient strategies like Roth conversions and setting up trusts to best plan for these tax opportunities.
We would advise you to seek guidance from a retirement planning firm specializing in tax planning. Our firm has a list of over 50 tax-saving strategies that we look to implement for each of our clients. Many of those strategies can be found in the book I mentioned above.
The other important tax to be aware of when considering transferring wealth is the estate tax. This is not a concern to many right now, considering the 2026 limit before an individual has to pay estate tax is almost $15 million.
However, even if you do not have that much wealth, I would still encourage you to start considering planning for estate taxes. Why? Because the estate tax limit has been well under $1 million as recently as 2001.
And remember, our country is more than $38 trillion in debt. Do you think the government will find ways to get hardworking and smart people to pay more taxes?
The way estate taxes work is that any money you have over the limit could be taxed at around a 40% tax rate, leaving almost as much money to Uncle Sam as to your beneficiary.
The good news? Through effective tax planning, you can find ways to avoid having Uncle Sam as a beneficiary when it comes to estate taxes.
5. Do your due diligence
Lastly, if you are working with a financial planner, we suggest they help with estate planning and ensure the right documents are in place while avoiding things you do not need. We have seen that happen far too many times.
For example, some clients of ours attended a steak dinner held by an estate planning attorney who tried to sell them a $5,000 estate plan. The attorney was trying to sell them something they did not need to make more money.
So my point is: Make sure you do your due diligence and find a group you can truly trust.
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