Tackling estate planning in 7 basic steps

Estate planning is one of those tasks that makes almost any other job look appealing, no matter how lowly.

The good news is that you’ve probably already done a little bit of estate planning—you just may not be aware of it. It's helpful to think of estate planning as a process rather than something that’s one-and-done and begins and ends in an attorney’s office.

Here are the key steps to take.

Step 1: Find a Qualified Attorney

Start by asking other financial professionals who you work with—whether a financial advisor or an accountant—for recommendations. If you have a specific situation that is likely to affect your estate plan — for example, if you’re a small-business owner or if you have a child with special needs —be sure to ask for referrals to attorneys who are well-versed in those areas.

Before you select an attorney, it’s perfectly reasonable to conduct a basic informational interview.

As you speak with a prospective estate-planning attorney, also weigh the intangibles. Do you like this person, and would you be comfortable supplying him or her with personal information about your finances and family situation?

Step 2: Take Stock of Your Assets

Spend time enumerating your assets and their value: your investment accounts as well as life insurance, personal assets such as your home, and your share of any businesses that you own. You should also gather current information about any debts outstanding. Your estate-planning attorney is likely to provide you with a worksheet to document your assets and liabilities, but it’s helpful to collect this information in advance.

Step 3: Identify Key Individuals

You’ll need individuals to fill the following key roles. Note that the same individual can fulfill more than one role.

Executor: A person who gathers all of your assets and makes sure that they are distributed as spelled out in your will. Many people call upon family members to serve as executors, but it’s also possible—and in some cases desirable—to hire a professional.

Durable (or Financial) Power of Attorney: A durable power of attorney is a document that grants an individual the legal authority to make financial decisions on your behalf if you should become disabled and unable to manage your own financial affairs.

Power of Attorney for Healthcare: A power of attorney for healthcare is a document that specifies whom you entrust with making healthcare decisions on your behalf if you are disabled and unable to make them on your own.

Guardian: A person who would look after your children if you and your spouse were to die when your children are minors.

Step 4: Know the Key Documents You Need

At a minimum, you should ask your attorney to draft the following:

Last Will and Testament: A legal document that tells everyone—including your heirs—how you would like your assets distributed after you’re gone.

Living Will: A document that tells your loved ones and your healthcare providers how you would like to be cared for if you should become terminally ill.

Step 5: Manage Your Documents

Once your estate-planning documents are drafted, destroy any older versions of them. You must also keep the documents in a safe place, either in a home safe, in the top drawer of a secure file cabinet in your home, or in your safe-deposit box.

Notify your executor of the whereabouts of your estate-planning documents, and provide copies of the relevant documents to your executor, agents for powers of attorney, and the guardian for your children.

Step 6: Don’t Neglect the Softer Side of Estate Planning

This may include considersations like: If you end up needing long-term care, would you rather receive that care at home, provided you could afford it? If in the unlikely scenario your guardians have to care for your minor children, what are the key values you’d like them to impart to your kids?

Step 7: Plan to Keep Your Plan Current

Plan to notify your estate-planning attorney, and possibly revise your documents, if you experience any of the following:

Change in marital or family status (for example, marriage, divorce, birth, or adoption of child)

Major change in assets—either sale or purchase

Major change in financial status

Death or ill health of one of your beneficiaries

Death or ill health of executor, power of attorneys, or guardian