5 Estate Planning Tips to Help You Prepare for 2025 and Beyond
As you prepare for the new year, don’t forget about your estate plan! It’s important to regularly review and update your estate plan to help ensure it continues to meet your needs, protect your loved ones and keep up with legislative changes.
Following are five tips to help ensure your estate plan remains well positioned for 2025 and beyond.
#1 – Review Your Beneficiary Designations
Proper beneficiary designations play a key role in making sure your assets are passed along according to your wishes. However, one typically makes these designations when they first establish a new account, such as a 401k or IRA. Once that account is established, it’s easy to forget about these designations. What you may not realize is a beneficiary designation takes precedence over a will or trust. This means even if you recently updated your estate plan and your account beneficiaries are decades old, assets in beneficiary-designated accounts will be distributed to the named beneficiary. If that beneficiary is an ex-spouse or estranged family member, your assets could be distributed in a manner that’s inconsistent with your wishes. Because financial institutions seldom send reminders to update beneficiary designations, it’s important to proactively review them on a regular basis. The start of a new year is a great time to check in on your accounts and make any necessary changes to your beneficiaries.
#2 – Designate a Guardian for Minor Children
One of the most critical functions of an estate plan is to designate a guardian for minor children. A “guardian” refers to the person named in your will who will care for your children if you die before they reach the age of majority. The guardian makes decisions as a parent would, including decisions related to education, healthcare and the child’s general welfare.
If you haven’t already designated a guardian, it’s important to do so as soon as possible. The person you choose should be willing to raise your child(ren) according to your values and provide a safe, stable and loving home. Before naming a guardian, be sure to have a conversation with that person to make sure he or she is willing to take on the responsibility of caring for your child(ren), if necessary.
#3 – Make a Plan for Digital Assets
A more recent estate planning challenge is making a plan for how digital assets can be accessed and passed on to heirs following an individual’s death. The term “digital assets” refers to any content owned by an individual and stored digitally. These assets may include photos and videos, social media accounts, email, blogs, financial and investment accounts, domain registrations, etc.
Some digital assets have monetary value, such as purchased music, travel rewards and credit card points. Others have purely sentimental value, such as family photos and home movies. Either way, it’s important to plan for how your digital assets can be accessed and distributed by your heirs.
We offer a downloadable Digital Assets Inventory sheet to help you prepare.
#4 – Consider a Trust
If your current estate plan includes only a will, you may be surprised to learn that your assets will still be subject to probate. In fact, probate is typically the only way your executor will be able to step in and manage your assets after you pass away. The probate process can be time consuming, expensive and stressful for your heirs. In addition, probate proceedings are a matter of public record, so anyone (including creditors) can find out who’s inheriting your assets and how much they’re receiving.
On the other hand, a trust is a legal entity that holds assets and distributes them to your heirs according to the trust’s terms. Properly titled trust assets aren’t subject to probate, which helps ensure your estate is settled more quickly and inexpensively. Trusts can also provide tax and asset protection benefits and allow you to provide age- or timing-based specifications on how assets are to be distributed.
If you already have a trust in place, it’s vital that you regularly review its terms to help ensure they continue to match your estate planning wishes. It’s also important that your assets and accounts are properly titled in the trust’s name to make sure they pass to your heirs as efficiently as possible.
#5 – Prepare for Incapacity
Another important component of an estate plan is the protection it can provide should you become incapacitated and unable to make financial and/or medical decisions on your own. There are two key estate planning documents that can help protect you: a durable power of attorney and a health care power of attorney.
Durable Power of Attorney
A durable power of attorney allows you to designate an individual to handle financial matters on your behalf, such as paying bills, filing your taxes or managing your retirement accounts, should you become incapacitated. It’s important to have this document in place to avoid potential legal complications for your loved ones in the event of your incapacitation. Without a durable power of attorney, a probate court will hold a public hearing to appoint an agent to act on your behalf. This can be a lengthy and expensive legal process.
Once the court appoints an agent to handle your finances, you’ll no longer have the right to manage them on your own. The designated agent will likely need to post a bond, which serves as insurance in the event he or she steals or mishandles your assets. The agent will also need court approval to make certain financial transactions on your behalf.
This can all be avoided with a properly executed durable power of attorney.
Health Care Power of Attorney
Similar to a durable power of attorney, a health care power of attorney designates an individual to make medical decisions on your behalf should you become incapacitated. This document can also specify exactly what types of medical interventions you agree to and provides the authority for a loved one to give permission to carry out your wishes, as well as authorization for your agent to have access to medical information under HIPAA.