Estate planning is a critical step to ensure your assets are distributed according to your wishes and your loved ones are protected after your passing. It also helps minimize taxes and legal complications. At Two Palms Accounting and Tax Solutions, we’ve outlined the essentials of estate planning to help you get started.

1. Create a Will

A will is the cornerstone of any estate plan. It specifies how your assets, such as property, savings, and personal belongings, should be distributed. It also allows you to name guardians for minor children. Without a will, state laws determine asset distribution, which may not align with your wishes. Work with an attorney to draft a legally sound will.

Pro Tip: Review and update your will every 3-5 years or after major life events, such as marriage, divorce, or the birth of a child.

2. Establish a Trust

A trust allows you to place assets under the control of a trustee for the benefit of your heirs. Unlike a will, a trust can avoid probate, ensuring faster and private asset distribution. Common types include revocable living trusts and irrevocable trusts, which can also reduce estate taxes. Consult with a professional to determine if a trust suits your needs.

3. Designate Beneficiaries

Ensure your retirement accounts, life insurance policies, and other financial accounts have up-to-date beneficiary designations. These designations override instructions in a will, so review them regularly to reflect your current intentions. Failing to update beneficiaries after life changes, like a divorce, can lead to unintended outcomes.

Ascertain Beneficiaries for Digital Assets

Many people overlook the tax implications of their estate. For 2023, the federal estate tax exemption is $12.92 million per person, but some states impose their own estate or inheritance taxes at lower thresholds. Proper planning, such as gifting assets during your lifetime or setting up trusts, can help minimize tax liabilities for your heirs.

4. Plan for Incapacity

Estate planning isn’t just about after your passing—it also covers what happens if you become incapacitated. A durable power of attorney designates someone to manage your finances, while a healthcare proxy appoints someone to make medical decisions. These documents ensure your wishes are followed if you can’t make decisions yourself.

Estate planning is a vital process to protect your legacy and provide peace of mind for your family. Start by taking inventory of your assets and discussing your goals with loved ones. Contact Two Palms Accounting and Tax Solutions for guidance on tax-efficient estate planning strategies tailored to your situation.