How to create a sound estate plan

Here are five actions that can help create a sound estate plan

Everybody always tells us we need an estate plan. But do we really? And what does that actually mean and how do we go about creating one—or checking the one we have?

You want a well-thought-out estate plan so that if, and when you are incapacitated or pass away, what you’d like to happen (to you, your assets and family members) actually does. That means you need to put some basic legal documents in place and take some key actions.

Here, we offer the five actions needed to create a sound estate plan. These apply to every U.S. adult—no exceptions. So if you haven’t taken these estate planning steps, we strongly recommend you do so as soon as possible.

Estate Planning Checklist 

1. Know what you have. Take an inventory of your assets and where they are held. That includes all your investment and retirement accounts, as well as insurance policies, deeds and safe deposit boxes. This accounting is essential information for anyone who will be handling your estate. 

2. Look carefully at how your assets are owned. We cannot emphasize how important it is for you to know whether the assets are held jointly or solely. With your retirement accounts and insurance policies, it is critical that you name both primary and contingent beneficiaries.

Titling can make a big difference in how assets transfer to people.  For example, your will may not control how jointly held assets will pass. Rather, jointly held property will pass automatically to the joint owner if held with rights of survivorship (often referred to as “JTWROS” property) or as tenants by the entirety (a form of joint ownership for married couples in some states.)

Neither does your will control assets that pass via beneficiary designation, like an IRA, 401(k) or life insurance; instead these assets will pass to whomever you designate in the beneficiary form. If you haven’t designated a beneficiary for your retirement account or insurance policy, the assets or insurance proceeds still are not subject to your will, but rather will be transferred according to whatever your retirement plan or insurance provider has as its default beneficiary—typically that’ll be your estate or, if you’re married, your spouse.

3. Make a will, sign it and be sure you follow your state’s rules so the will is considered valid. For many reasons, people tend to put off making a will. But if you don’t have a will, it will be the state in which you have lived that will dictate to whom, how, and when any assets you own in your sole name (other than beneficiary designation assets, mentioned in number 2, above) will be distributed.

Also, if you have minor children, identify a guardian for them in your will. If you do not, the state may get involved in determining who becomes their legal guardian.

4. Name someone to make financial and medical decisions for you when you cannot. If something happens to you and you can no longer make important financial or medical decisions for yourself, you’ll want to have someone you trust—e.g., a family member or professional—with the authority to do so. There are separate legal documents you’ll need to make sure this happens: a power of attorney for financial decisions; and, for the medical decisions, a healthcare proxy (which may be called something different in different states). In addition to signing formal documents, be sure to discuss with your trusted family member or professional the kinds of decisions you’d like them to make for you. Also consider creating a “living will” to let your healthcare providers know your wishes regarding a variety of medical options.

5. Speak to everyone involved. A simple but key estate planning tip is to make a list of all your advisors (accountant, attorney, financial, etc.) and key family members so that the people who handle your estate will know whom to contact. Also consider letting your family know the outlines of your estate plan. Communication—especially if you have a blended or complex family situation—can be key to making sure that your wishes are carried out, and your family lives harmoniously.

We can help

These are the basic building blocks of an estate plan that everyone should have if they want to decide who benefits from their assets and how they, and their family, will be taken care of. There are additional estate planning strategies for people who have significant wealth and a desire to do multigenerational and/or charitable giving. For example, you may want to consider whether trusts might serve your goals. You also might explore different approaches to furthering your children’s (and grandchildren’s) education. Speak with your J.P. Morgan team about your family’s needs.

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