Estate Planning Steps to Protect Your Loved Ones and Legacy

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Estate planning is a crucial part of retirement, ensuring your assets are distributed according to your wishes while minimizing taxes and legal hurdles for your loved ones.

During my time in the beneficiary department at my previous employer, I witnessed firsthand the difficulties that can arise when individuals neglect estate planning.

One case that stuck with me involved a widowed father who never updated his life insurance beneficiary after his wife passed away. When he later passed, the payout defaulted to his estate instead of his children, forcing them into a lengthy probate process.

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The Kiplinger Building Wealth program handpicks financial advisers and business owners from around the world to share retirement, estate planning and tax strategies to preserve and grow your wealth. These experts, who never pay for inclusion on the site, include professional wealth managers, fiduciary financial planners, CPAs and lawyers. Most of them have certifications including CFP®, ChFC®, IAR, AIF®, CDFA® and more, and their stellar records can be checked through the SEC or FINRA.

Legal fees and delays left them struggling for months to access the funds he had intended for their financial security.

This situation could have been avoided with a simple beneficiary update, underscoring how small oversights can cause unnecessary hardship.

Estate planning isn’t just for the wealthy; it’s essential for anyone who wants to protect their loved ones. According to a 2023 survey by Caring.com, two-thirds of American adults do not have an estate plan.

Whether you're starting fresh or updating your plan, here’s a checklist of key legal and financial steps to take.

1. Create or update your will

A will is the foundation of any estate plan, specifying asset distribution and designating guardians for dependents.

If you already have a will, review it periodically to ensure it reflects any changes in your financial situation or family dynamics.

2. Establish a trust (if needed)

Revocable and irrevocable trusts can help manage assets, avoid probate and provide structured support for beneficiaries in the following ways:

Revocable trust

Control. The grantor (the person who creates the trust) retains full control and can modify or revoke it
Probate avoidance. Assets bypass probate for a smoother transition
Asset protection. Offers little protection from creditors
Taxes. The trust’s income is typically taxed as part of the grantor’s personal income

Irrevocable trust

Control. The grantor permanently gives up control; changes require approval
Probate avoidance. Avoids probate, like a revocable trust
Asset protection. Provides stronger protection against creditors and lawsuits
Taxes. May offer estate tax benefits, as assets are removed from the grantor’s taxable estate

3. Assign power of attorney

P ower of attorney grants a trusted person the ability to handle financial and legal matters if you become incapacitated.

Without this, your family may face costly and time-consuming legal challenges to manage your affairs.

4. Create a health care directive

Also known as a living will, this document outlines medical treatment preferences and designates a health care proxy.

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One of the most well-known cases highlighting the importance of a living will is Terri Schiavo. In 1990, Schiavo suffered a cardiac arrest, leaving her in a persistent vegetative state. Without an advance directive, her husband and parents fought a years-long legal battle over her care.

The case, which reached Congress and the White House, underscored the need for clear health care directives.

5. Review beneficiary designations

Retirement accounts, insurance policies and other financial assets allow you to name beneficiaries. These beneficiary designations override your will, so ensure they align with your estate plan.

6. Minimize estate taxes

Depending on your estate size, taxes may be a concern. Strategies such as gifting assets, establishing charitable trusts or converting traditional retirement accounts to Roth IRAs can help reduce tax liabilities.

Real-life example: How one family saved millions in estate taxes

The Johnson family had a $15 million estate, subject to more than $1.6 million in estate taxes. To minimize their tax burden, their financial planner implemented:

Annual gifting. Each parent gifted their three children $17,000 per year tax-free, reducing the taxable estate.
Charitable r emainder t rust (CRT). A $2 million donation provided tax deductions and lifetime income while avoiding estate tax.
Roth IRA conversions. By converting traditional IRAs to Roth IRAs, they paid taxes upfront at lower rates, ensuring tax-free inheritance for heirs.

7. Organize important documents

Keep estate planning documents, financial records and legal paperwork in a secure, accessible location. Tell your executor and family members where to find them in case of an emergency.

8. Review your plan regularly

Life changes — marriage, divorce, new grandchildren or financial shifts — may require updates to your estate plan. Regular reviews help avoid unintended consequences and ensure your wishes are honored.

Estate planning isn’t just about distributing assets. It’s about securing your family’s future. Whether drafting your first will or updating an existing plan, take control of your legacy today.

Schedule a consultation with an estate planning attorney or financial advis e r to ensure your loved ones are protected.

Alex Allegro is a planning advisor with Rooted Wealth Advisors, Inc. This article is not intended as tax or legal advice. Consult with a qualified professional before implementing any strategies discussed.

The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.

Disclaimer

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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Alex Allegro, a Series 65 holder with a Bachelor’s in Finance, brings corporate financial planning experience and a passion for helping others to the Rooted team. Outside the office, he enjoys golfing, staying active and spending time with family and friends.