Basics on estate planning: 10 aspects to look at (Part 2 and final)

Last Updated on March 9, 2023 by Carlos Lopez

In today’s post we will look at the second part of the basics of estate planning (read the part 1 here). Let’s get to it!

6. Check who will be the beneficiaries of your estate plan.

It is extremely important to check everything included in your will (and documents attached to your estate plan) as you may miss something.

• You must make sure that the people you want to benefit, receive what it says in the document without there being any situation that eliminates that possibility, it is normal that sometimes beneficiaries are forgotten in insurance policies or joint accounts that were never closed.
• Verify the beneficiaries of your insurance and retirement accounts, you must keep them updated in order to avoid that at the time of making a valid will, other people “appear” whose priority may be higher (depending on the documents) than that of your last appointments in your will.
• All beneficiary sections should be filled in and not left blank, in the case of probate, the State rules may go against the distribution you had in mind and thus indirectly disadvantage your beneficiaries.
• You should think about leaving contingent beneficiaries named in case of backup, in case one of the orphinals predeceases you and you forget to update them in your estate plan.

In general, review your designated beneficiaries every few years (2-3 years), also whenever you see that there has been a major change in your family’s life (and you think you need to make adjustments to your estate plan).

7. A very important step: legally avoiding inheritance taxes as much as possible

One of the most common ways to save estate taxes (for married couples) is to plan a “credit shelter” or “bypass” trust (CST), which is designed to allow wealthy couples to reduce (or completely avoid) estate taxes when transferring assets to heirs (usually their children).

This type of irrevocable trust is structured so that when the creator of the trust dies, the assets specified in the trust, and the income they generate, are transferred to his or her spouse.

There are also other techniques, for both married and unmarried persons, which include:

• Creation of family businesses
• Lifetime donations to your descendants
• Contributions to charities
• Use of life insurance with extended coverages
• And other activities to ensure that the full value of your assets is transferred to your loved ones without being diminished by estate taxes.

Keep in mind that if your joint equity amounts to more than $ 1,500,000, you should find out from a specialized attorney which of the existing techniques might apply in your case.

8. Avoid unnecessary legal fees whenever possible

If you have assets worth more than $500,000, using a joint tenancy may not be enough to avoid probate expenses at your death.

You should, together with your estate planning attorney, inquire about the services that are involved in trust and death administrations, as well as in a guardianship, and how they can be paid for. A skilled attorney will be able to identify all of these expenses and help you map out a plan so that they can be minimized (always in a legal manner).

Your specialized attorney will be able to uncover those opportunities, to identify potential problems, solutions and then give you a budget so you know how much to pay to resolve the problem properly.

9. Is there a family business? Do everything to keep it afloat

In most cases, within 9 months of your death or your spouse’s death, the estate tax will come due.

When family businesses are illiquid, they are frequently sold to raise the money with which to pay the estate taxes that are sure to arrive.

Opportunities to defer estate taxes on family businesses are limited, but there are ways for beneficiaries to do proper planning (with court-approved legal techniques) and thereby reduce estate taxes.

To do this, it is important that the business be properly owned prior to your death and that planning techniques be implemented so that significant valuation discounts can be obtained in terms of marketability and control, even if the family business is a rental real estate or marketable securities investment.

10. Simplify your finances

If you have changed jobs several times during your life, it is very likely that you have different 401(k) retirement plans open with previous employers, and it is also quite likely that they are linked to different IRA accounts.

The best thing you can do, is to consider consolidating these accounts into a single individual IRA. This will allow you to

• Lower costs
• Better investment options
• Greater investment selection
• Less paperwork (and saving documents) 
• Manage everything in a simpler way

Estate Planning Attorney in Washington, D.C.

At Lopez Law Firm LLC we will make that your estate plan meets all the necessary aspects so that it can be executed smoothly when the time comes. Schedule your consultation today!