Estate Planning Decoded- The Why, How, and Who


Nobody wants to think about the inevitable – death. We all know it will eventually happen, but it is not something we like to think about or talk about. Why we do this is human nature, we tend to think that as long as we don’t talk about it, it will not happen. Hopefully it will not happen anytime soon! But it will happen. And because it WILL happen, and sometimes in an untimely or tragic way, it is vitally important for us to make sure all necessary plans are in place to help secure the lives of our loved ones. That is where estate planning comes in.  

Estate planning is necessary to ensure that assets will be secured for loved ones upon death or incapacitation as well as making sure children, if there are any, are cared for according to the person’s wishes. It does not need to be complicated, but you do want to make sure that it is done properly to ensure that money and property is passed on according to your desires and the maximum amount of money is transferred to your beneficiaries rather than having legal hang-ups and punitive or unnecessary taxes.  


While the process does not have to be complicated, it does have to be done properly.  Certainly you could handle it yourself, but you need to be careful as this is not something that you can leave to chance or mistakes. Remember that your family will not be in the best frame of mind at the time that the estate distribution comes into play, so you definitely do not want things to be further complicated. To that end, it is probably best that you have a team of specialists help with your estate planning. Some estates are easier than others depending on the amount of assets and the complexity of the plans for beneficiaries. You need to assess your personal situation and think through who you will need to help in the process of your estate planning. I recommend that you have an insurance agent, a CPA, a certified financial planner (CFP), and an attorney help you through the process of planning your estate. 

WHO and Roles: 

Insurance Agent:  Often overlooked and underestimated is an insurance agent. Having a good insurance agent who is well-versed in the different types of insurance policies and the one that best fits the needs of his or her client is crucial. Please note that I have discussed life insurance before, whole life and term, and I recommend term life insurance over whole life insurance. But in addition to helping clients with insurance, insurance agents often provide valuable advice and tools regarding estate planning. They can provide information regarding your estate well in advance of the actual estate planning process.  

CPA: Another important person in estate planning is a CPA who understands a client’s financial estate and the need for safeguarding assets often before the client does. In addition, most CPAs have an understanding of estate tax laws and the financial implications of what happens when these laws are not followed and assets are not secured. Let’s keep in mind that the reason for estate planning is to secure assets for a person’s loved ones. Having assets tied up in undue taxes and litigation can be excruciating for a family upon the death of a loved one. In addition to understanding these laws, CPAs are also adept at helping to appraise the value of the estate as well as identifying cash flow requirements. Lastly, the CPA can complete and file the final tax return for the deceased along with Form 706 which is the United States Estate Tax Return (and Generation-Skipping Transfer) that is used along with the deceased client’s state 1040 form. As you can see, the role of the CPA is vital.

CFP: I advise you to utilize a certified financial planner (CFP) before death as they are key in managing assets, providing advice about different types of investments, and planning cash flow. In fact, they will manage cash flow during a client’s life and after death. Choose your CFP carefully and make sure he or she has specific knowledge of insurance along with estate taxes and laws in order to best meet your needs in the present and in the future.  

Attorney: The last key person on the team is an attorney. Some attorneys specialize in estate planning and understand all of the nuances of the laws associated with estates. They create all of the legal documents, forming the framework, and file them appropriately, so estate assets are protected, children and dependents are provided for, and all wishes and desires are noted. It is vital that these documents are properly created and filed in order for them to be recognized as “official.”  Lawyers are recognized as the ones who can legally draft documents and file them; it is their job. Therefore, it is best to leave this responsibility to the professionals. In addition, the same attorney who drafts and files the documents for a person’s estate can also be used during the probate process and the distribution of assets to beneficiaries. A different attorney may be used for the probate and distribution process, but many find it is more streamlined to keep the same attorney for this process.  

Process: Obviously you do not need to run out today and secure all four of these professions and plan every detail of your estate. You need to assess where you are in your life especially regarding your assets, and your responsibilities. If you are young, single, and just starting your career, you would not need to secure the services of all of these professionals. At this point, you probably can take care of most of your investments on your own and can file your own taxes since they are pretty simple unless you have extenuating circumstances. However, as you progress in your career and life, earning more money, acquiring more assets, and taking on more responsibilities, you will want to add these professionals to your team. Think about the purpose of each of these. Certainly you will want to utilize them accordingly. Along the way, as your wealth grows, you will want to secure your assets. Additionally, if you marry and/or have children, you will want to ensure they are financially secure in the event that anything happens to you and your income is no longer there for them. That is the time for you to add a good insurance agent to your team. Little by little, you will want to evaluate your life and your financial situation and add the right components in order to best provide for your family when the inevitable comes.

Like I noted earlier, nobody wants to think about death, but we all know it will happen. Therefore, it is best to be prudent and plan for that day. It is one of the most important and loving things you can do for your loved ones.  

Published by Budgetdog

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