10 Key Estate Planning Actions to Take This Year

As the year winds down, many of us turn our focus to celebrations, gatherings, and reflecting on what we’ve accomplished. But this season also provides the perfect opportunity to consider something equally important: estate planning. Taking a little time now to organize your affairs can bring peace of mind and set your loved ones up for a secure future.

Why the Year-End is Ideal for Estate Planning

1. Reflecting on the Year: The end of the year often inspires introspection. Have there been significant life changes in 2024? A marriage, a new child, a major purchase, or even a loss? These milestones are vital to address in your estate plan.
2. Maximizing Tax Benefits: Many estate planning strategies involve minimizing taxes, and the end of the year is crucial for making final adjustments. For example, gifting assets to family members, contributing to charitable organizations, or funding trusts can help reduce estate tax exposure while also achieving personal goals.
3. Setting New Year’s Intentions: A common resolution is to “get organized.” Starting your estate planning now ensures you begin the new year with this critical task already checked off your list.

Key Estate Planning Actions Before Year-End

If you haven’t reviewed your estate plan recently, now is the time. Here’s what to focus on:

• Review Your Will and Trust: Ensure these documents still reflect your wishes. Update beneficiaries, executors, or trustees if necessary.
• Evaluate Your Financial Picture: Take stock of assets like real estate, investments, and retirement accounts. Ensure they align with your overall estate strategy.
• Update Beneficiary Designations: Double-check accounts like life insurance, IRAs, and 401(k)s to confirm the right people are listed.
• Consider Gifting Opportunities: The IRS allows annual gifts up to a certain threshold without incurring gift taxes ($17,000 per individual in 2024). This can be a powerful tool for transferring wealth and reducing estate size.
• Fund or Reassess Your Trusts: If you’ve set up a living trust, make sure all appropriate assets are transferred into it. Leaving assets outside the trust can complicate probate later.

Avoiding Last-Minute Stress

While the final weeks of the year can be busy, estate planning doesn’t have to be overwhelming. Scheduling a consultation with an experienced estate planning attorney can simplify the process and ensure you cover all necessary details. They’ll guide you in structuring your plan to maximize benefits for your heirs, minimize taxes, and achieve peace of mind.

Start the New Year with Confidence

Estate planning isn’t just about preparing for the unexpected—it’s about creating a legacy and ensuring your loved ones are cared for. Taking steps now ensures you enter the new year with this vital task behind you, ready to focus on what matters most.

Planning for Incapacity and Health Care

A common misconception is that estate planning only deals with what happens after you’re gone. In reality, a thorough plan also protects you and your assets if you become unable to make decisions for yourself due to illness or injury. This is known as planning for incapacity, and it’s a critical component of securing your future. By putting legal documents in place now, you ensure that people you trust can step in to manage your affairs and advocate for your medical care, saving your family from the stress and expense of going to court to get that authority.

Durable Power of Attorney for Finances

A Durable Power of Attorney (DPOA) for Finances is a legal document that lets you appoint someone to manage your money and pay your bills if you become incapacitated. This person, known as your agent, can handle tasks like paying your mortgage, managing your investments, and filing your taxes. Without a DPOA, your family might need a court order to access your accounts to pay for your care, a process that can be slow and costly. Choosing a trustworthy and responsible agent is essential, as they will have significant control over your financial life when you need it most. A well-structured estate plan will always include this vital protection.

Health Care Proxy

A Health Care Proxy, sometimes called a Power of Attorney for Health Care, is a document that allows you to name a person to make medical decisions for you if you can’t communicate them yourself. This designated agent can speak with doctors, access your medical records, and decide on treatments based on what they know about your wishes. It’s incredibly important to have an open conversation with the person you choose, so they understand your values and what quality of life means to you. This ensures your medical care aligns with your personal beliefs, even when you can’t voice them.

Living Will (Advanced Directive)

While a Health Care Proxy names *who* will make decisions, a Living Will, or Advanced Directive, explains your *wishes* for medical treatment. This document provides clear instructions about the types of end-of-life care you do or do not want, such as the use of life support or feeding tubes. It works hand-in-hand with your Health Care Proxy, giving your appointed agent a written guide to follow. This removes the immense burden from your loved ones of having to guess what you would have wanted, allowing them to feel confident they are honoring your final wishes during a difficult time.

Defining Key Roles and Responsibilities in Your Plan

An estate plan is only as effective as the people chosen to carry it out. These key roles come with significant responsibilities, so it’s important to select individuals who are trustworthy, organized, and capable of handling the job. Thinking carefully about who you appoint as your executor, trustee, and guardian is one of the most important steps in the planning process. You are placing your legacy and the well-being of your loved ones in their hands, so choosing wisely is paramount. Be sure to discuss these roles with your chosen individuals to confirm they are willing to serve.

The Role of an Executor

An Executor is the person or institution you name in your will to be in charge of your estate after you pass away. Their main job is to ensure your final wishes, as outlined in your will, are followed. According to Ameriprise Financial, an Executor “manages your will, pays bills and taxes, and distributes inheritances.” This involves a lot of administrative work, such as inventorying your assets, notifying banks and government agencies, and preparing final tax returns. If your estate goes through the court process known as probate, the executor will also be responsible for managing all court filings and proceedings.

The Role of a Trustee

If you have a trust, you will need to name a Trustee. This person is responsible for managing the money and property held within the trust for the benefit of your beneficiaries. A Trustee’s duties include keeping detailed records, filing taxes for the trust, investing trust assets, and distributing funds to beneficiaries according to the rules you’ve set. Unlike an executor whose job typically ends when the estate is settled, a trustee’s role can last for many years, especially if the trust is designed to support minor children or manage assets over a long period. This is a significant responsibility that requires financial acumen and integrity, which is why professional trust administration services are often a great choice.

Naming a Guardian for Minor Children

For parents with young children, naming a guardian is arguably the most important part of an estate plan. This is the person who will raise your children if you and the other parent are no longer able to. When making this decision, consider factors like the person’s parenting style, values, location, and financial stability. It is crucial to “discuss this with them beforehand,” as MetLife advises, to ensure they are willing and prepared to take on such a profound responsibility. You should also name an alternate guardian in case your first choice is unable to serve when the time comes.

Understanding Key Legal and Financial Concepts

The world of estate planning has its own language, filled with legal and financial terms that can feel intimidating at first. However, you don’t need to be an expert to make smart decisions. Understanding a few fundamental concepts, like what probate is and how estate taxes work, can empower you to build a more effective plan. Getting familiar with these basics will help you have more productive conversations with your attorney and feel more confident in the choices you make for your family’s future. Let’s break down some of the most important ideas.

What is Probate and Why You May Want to Avoid It

Probate is the court-supervised process of validating a will and settling an estate. While it serves an important function, it has several major drawbacks. As MetLife notes, “Probate is a public, often slow, and costly court process to verify your will.” Because it’s a public proceeding, the details of your assets and who inherits them become part of the public record, which many families prefer to keep private. The process can also take months or even years to complete, and the associated legal and court fees can reduce the amount of inheritance your loved ones receive. In California, many people use a living trust to transfer assets outside of probate, ensuring a faster, more private, and less expensive process.

A Brief Guide to Estate-Related Taxes

Taxes are an unavoidable part of life, and they can be a factor after death as well. The primary tax to be aware of in estate planning is the federal estate tax. According to Fidelity, “Federal taxes on gifts and estates can be very high,” but they only apply to very large estates. Most estates fall below the exemption threshold and won’t owe any federal tax. It’s also important to consider state-level taxes and income taxes that may be due on certain inherited assets. Proper planning can help minimize or even eliminate the tax burden on your estate, preserving more of your wealth for your beneficiaries.

Federal Estate Tax Exemption for 2024

The good news for most families is that the federal estate tax only affects the wealthiest households. For 2024, “Estates worth less than $13,610,000 usually don’t have to pay federal estate tax,” as reported by MetLife. This amount is known as the federal estate tax exemption, and it’s indexed for inflation, so it typically increases each year. If the total value of your estate is below this threshold, your executor generally won’t need to file a federal estate tax return. However, these laws can change, so it’s always wise to stay informed.

State-Specific Estate and Inheritance Taxes

In addition to the federal tax, “Some states also have their own estate or inheritance taxes,” as Fidelity points out. An estate tax is paid by the estate itself, while an inheritance tax is paid by the beneficiaries who receive the assets. Fortunately for those living in the Golden State, California does not currently have a state-level estate tax or an inheritance tax. This simplifies the planning process for California residents and means more of your assets can pass directly to your heirs without being taxed by the state.

Income in Respect of a Decedent (IRD)

It’s important to “be aware of ‘Income in Respect of a Decedent’ (IRD) taxes,” advises MetLife. IRD refers to income that the deceased person had a right to receive but had not yet collected at the time of their death. Common examples include a final paycheck, deferred compensation, or distributions from retirement accounts like a 401(k) or traditional IRA. This income doesn’t get a step-up in basis and is taxable to the beneficiary who ultimately receives it, who must report it on their own income tax return.

Tax Payment Deadlines

When estate taxes are due, there are strict deadlines for payment. “Estate taxes are typically due within nine months of a person’s death,” according to MetLife. This tight timeline requires the executor to act quickly to gather all necessary financial information, get assets appraised, and prepare the estate tax return (Form 706). An extension to file can be requested, but the estimated tax owed is still generally due by the nine-month deadline. This is another reason why having an organized and efficient executor is so important for a smooth estate administration.

Planning for All Types of Assets

When you think about your estate, your home, car, and bank accounts probably come to mind first. But a modern estate plan needs to account for a much wider range of assets. From your online accounts and digital photos to the potential need for long-term care in the future, a comprehensive plan looks at the complete picture. Ensuring every asset is properly accounted for and legally titled is key to making sure your plan works the way you intend it to, without creating unexpected problems for your loved ones down the road.

What Happens to Your Digital Assets?

In our increasingly online world, it’s crucial to “think about your online accounts, photos, and documents.” These digital assets—from social media profiles and email accounts to cryptocurrency and cloud storage—are a valuable part of your legacy. Without a plan, your family may not be able to access precious photos or manage your online presence. MetLife suggests you “name a ‘digital fiduciary’ to access or shut down your online presence.” This person can be granted the legal authority to handle your digital footprint according to your wishes, protecting both your privacy and your sentimental digital property.

Planning for Potential Long-Term Care

A comprehensive estate plan should also include a strategy for how you will pay for care later in life. The costs of long-term care, whether it’s “at home, in a community center, or in a nursing home,” can be substantial and can quickly deplete a lifetime of savings. Planning ahead can involve setting aside funds, purchasing long-term care insurance, or structuring your assets in a way that helps you qualify for government benefits like Medi-Cal in California. Addressing this possibility now protects your financial security and ensures you can receive the care you need without placing a heavy burden on your family.

Checking Legal Ownership and Property Titles

How an asset is legally owned can have a huge impact on how it’s transferred after your death. It’s essential to “make sure the legal papers for your real estate are correct and show who you want to inherit it.” The way a property is titled—for example, as joint tenants with right of survivorship or as community property—can override the instructions in your will. If an asset is not titled correctly or transferred into your trust, it may have to go through probate. Reviewing the titles on your home, bank accounts, and other major assets is a critical step to ensure your estate plan functions seamlessly.

The Personal Side of Estate Planning

Beyond the documents and financial details, estate planning is a deeply personal act of care for the people you love. It’s an opportunity to communicate your values, share your wishes, and make things easier for your family during an already difficult time. Taking the time to handle the personal aspects of your plan—from talking with your family to documenting your final wishes—can prevent misunderstandings and provide comfort and clarity when it’s needed most. This is where a plan transforms from a legal strategy into a true legacy of love and forethought.

Talking to Your Loved Ones About Your Plan

While it can be a difficult conversation to start, it’s wise to “share your estate plan decisions with your family to prevent confusion and arguments later on.” You don’t need to disclose every financial detail, but explaining why you made certain choices and who you’ve appointed to important roles can help manage expectations. Letting your executor and trustee know where to find your important documents is also a practical and helpful step. This transparency can foster understanding and reduce the potential for conflict, helping to preserve family harmony after you’re gone.

Documenting Your Final Wishes

Your will and trust handle the distribution of your assets, but what about your preferences for your funeral or memorial service? It’s a good idea to “write down your preferences for burial or cremation, memorial services, and where donations should go.” These instructions are typically kept in a separate document, often called a letter of final instructions, rather than in your will. Documenting these wishes provides clear guidance for your family and relieves them of the stress of making these deeply personal decisions on your behalf while they are grieving.

Building Your Professional Team

Creating a solid estate plan isn’t something you should do in isolation. While it’s your vision and your decisions, assembling a team of experienced professionals is the best way to ensure your plan is comprehensive, legally sound, and financially effective. According to MetLife, it’s wise to “get help from experts like a financial advisor, a tax professional, and an estate planning lawyer.” Each professional brings a unique perspective and skill set to the table, and their collaboration ensures that all aspects of your financial life are working together to achieve your legacy goals.

Working with a Financial Advisor

A financial advisor plays a key role in your estate planning team by looking at the big picture of your wealth and investments. They can help you structure your assets in a way that aligns with your estate planning goals, ensuring your investment strategy, retirement accounts, and life insurance policies all support the legacy you want to leave. They work to grow and protect your assets during your lifetime and can help ensure a smooth transition of wealth to the next generation, providing valuable input on the financial implications of your decisions.

Consulting a Tax Professional

Taxes can be one of the most complex parts of settling an estate, which is why a tax professional is an invaluable member of your team. As Fidelity explains, “A tax advisor helps you understand and deal with any taxes related to your estate.” They can offer strategies to minimize gift and estate taxes and ensure your plan is as tax-efficient as possible. After you pass away, your executor will rely heavily on a tax professional to prepare final income tax returns and the estate tax return, if one is required. Your estate planning attorney at a firm like Lawvex will coordinate with these experts to ensure your plan is cohesive and legally robust.

Let Lawvex Help You Plan

At Lawvex, we specialize in estate planning that’s tailored to your unique needs. Whether you need to update your will, set up a trust, or explore tax-saving strategies, our experienced attorneys are here to guide you every step of the way.

Don’t wait until the clock strikes midnight on December 31—schedule your consultation today and start 2025 with confidence and peace of mind. Contact us today to get started.