Five Steps to an Estate Plan That Will Protect Your Family
Most of us don’t like thinking about our own mortality, but avoiding the topic won’t make it go away. Father Time will come for all of us — the only question is whether you and your loved ones are ready.
According to a recent survey, fewer Americans are writing wills since the start of the pandemic. In 2024, just 32% of adults had a will, down from 34% in 2023. While having an estate plan is one of the most important elements of intergenerational wealth transfer, it’s by no means the only thing you should think about.
This article is written by Jamie Carroll, a wealth adviser at Ballast Rock Private Wealth. Jamie works closely with clients to develop a comprehensive approach to managing wealth and devising tailored initiatives to help them pursue their long-term aspirations.
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If you want to protect your family and have the peace of mind that your final wishes will be carried out according to your specifications, consider the following and, when possible, speak with a financial professional.
1. Create an estate plan
The first step in planning for intergenerational wealth transfer is developing an estate plan. When deciding how to transfer assets, you can choose a will, a trust or both.
A will is a legal document that explains how your assets will be distributed following your death and names an executor of your estate and guardians for any minor children.
Though wills are simple and affordable, you’ll still have to go through probate — a costly and often time-consuming process — before an executor can act on their powers to sell property or distribute assets, for example.
If you want to avoid probate, you must create a trust. There are two kinds of trusts, revocable (or living) trusts and irrevocable trusts, which aren’t as common and can’t be changed without the approval of beneficiaries. If you have minor children, you will still need a will to specify guardianship.
Though a trust is the more costly of the two options, it will save you money in the long run because you won’t have to engage a lawyer to represent you through probate. Trusts can also help with tax planning and minimizing liabilities.
2. Take advantage of technology
After a family member dies, the first few weeks can feel like a scramble trying to gather all the necessary paperwork and information — all while dealing with the emotional toll of losing a loved one.
Fortunately, today there are digital tools to help keep important documents safe, secure and accessible to heirs.
From sensitive financial and medical information to photos/videos, passwords and social media logins, digital vaults keep all pertinent information in one location, so your family members don’t have to scour through documents to find everything they need to manage your estate.
You can choose from a variety of options, which range from plans that are free to users to ones that offer more hands-on features — for example, closing accounts.
Cake is a 100% free online platform that allows users to record and share their end-of-life preferences, including funeral, legacy, health, digital and legal/financial information.
If users are looking for a more hands-on solution, GoodTrust offers a VIP plan that gives the company permission to close certain accounts after you pass away, eliminating a significant burden that falls to family members.
3. Consider life insurance
While a will or trust is important for safeguarding your assets and ensuring they are distributed according to your wishes, life insurance is also crucial for protecting your family’s financial future.
There are several options. At minimum, if you’re in your prime working years, you should have term life insurance, which is low cost and pays a defined benefit during a set period, typically five to 30 years.
This will ensure that your family is able to maintain their short-term lifestyle if you were to die early.
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If you want to provide your family with a guaranteed death benefit, you may want to consider purchasing a whole life policy, which lasts your entire life but will incur higher premiums, or universal life, offering adjustable premiums that increase over time while also providing a cash value component that grows based on market rates.
4. Optimize for taxes
For high-net-worth families, tax optimization plays an important role in estate planning. The current federal estate tax applies to individuals whose estates exceed $13.99 million.
If your estate is worth more than that, the excess value is subject to a 40% estate tax (12 states and the District of Columbia have an estate tax, and six states levy an inheritance tax; Maryland has both).
A financial adviser can help you create structures — such as annual gifting, a spousal lifetime access trust (SLAT) and/or a grantor retained annuity trust (GRAT) — that allow you to optimize the value of your estate.
5. Create a dialogue
While plans and strategies are important, so too is being open and honest. Creating a dialogue while you’re alive will ensure that everyone is on the same page and avoid disputes down the road.
Let your family members know how you plan to distribute your assets and educate your children about being responsible with finances so they will be in a strong position to further your legacy.
While you may be hesitant to face your own mortality, there is relief in knowing that your family is protected when the time comes.
Start the conversation today — talk to your children and family about your wishes and seek out experts who can help you navigate the many available options.
When you use all the tools at your disposal, you can create a smooth transition and bring multiple generations even closer together.
This material is intended for educational purposes only. You should always consult a financial, tax, or legal professional familiar with your unique circumstances before making any financial decisions.
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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
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