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The Essential Estate Planning Guide

By David McAlpine, Peoples Bank Wealth Management Group Officer

Has “writing a will” been on your to-do list for just a little shy of forever? Estate planning can feel overwhelming for a variety of reasons. On the practical side, you keep putting off making the time and contacting the professionals to help you. On the emotional side, it’s hard to think about your own death. Obstacles aside, everyone needs an estate plan. In this article, we’ll break down the estate planning process so you don’t feel so overwhelmed, then show you how to get started. If you have any questions, our experienced trust and estate planning professionals are here to help!

Photo: Man and woman looking at a computer. Text: According to the American Bar Association, 71% of Americans do not have a current will and 55% die without an estate plan in place.
 

What is estate planning?

Everyone, no matter your net worth, dies with an “estate.” Estate planning is the process of setting financial goals for your future and an estate plan is the outcome, with instructions for how you want your physical and financial assets to be distributed after your death.

If you have a family, good estate planning will help to ensure your loved ones will be taken care of financially after your death, especially if you pass away during your prime earning years.

Finally, estate planning also involves tax planning. With the right choices, you may be able to reduce the taxes you pay during your lifetime as well as the taxes your estate is subjected to after your death.

 

Important estate planning documents

Once you finish the planning and decision-making process, it’s time to draw up the legal documents that make up your estate plan. Here are the most common estate planning documents and what they mean:

  • Will and/or Revocable Trust: Both of these state your wishes for how to distribute your property after your death. Names guardian(s) for any dependents in your life, including pets. Also identifies an executor or trustee to be in charge of following out the instructions you have laid out in these documents.
  • Beneficiary designations: States the person or people who will receive the proceeds from your life insurance policy, retirement plan(s), and bank accounts.
  • Powers of attorney: Designate a durable power of attorney to act on your behalf and make legal and financial decisions for you. A health care power of attorney makes medical decisions for you. Both kinds of powers of attorney only take effect if you become incapacitated and unable to make decisions for yourself.
  • Living will: States your health care preferences, such as whether you want to be resuscitated or not.

In addition to these official, legal documents, it’s helpful to provide a list of important documents and where to find them. For example:

  • Life insurance policies
  • Annuities
  • Retirement accounts
  • Bank accounts
  • Funeral planning documents that provide guidance to surviving loved ones regarding your wishes for your funeral service
  • Marriage certificate and/or divorce papers
  • Birth certificates and/or adoption records
  • Real estate deeds
  • Car titles
  • Stocks, bonds, and mutual funds
  • Passwords for digital accounts such as email, social media, etc., as well as instructions for what to do with these accounts after your death.

Photo: 2 women speaking. Text: 25% of Americans have not discussed the estate planning process with their family.

 

Benefits of estate planning

  • Provide for your family financially after your death so they can enjoy the same standard of living, especially if you die before your retirement age. 
  • Make sure your kid(s) will be raised as you want them to be, should both parents pass away before minors turn 18.
  • Minimize the costs of settling an estate without an estate plan.
  • Expedite the transfer of physical and financial property to your assets.
  • Reduce the burden to your loved ones of difficult decisions and administrative duties.
  • Lower your estate’s tax bill. Every dollar you save in taxes is one that can go to your heirs or charitable priorities.
  • Plan for an enjoyable retirement by figuring out now what you’ll need after you retire.
  • Ensure your wishes for yourself will be followed upon your death or incapacity.
  • Business owners can plan for the sale or succession of their business.
  • Allocate funds to your favorite charitable causes.

 

Estate planning professionals

The estate planning process can be complicated. Working with professionals can make the process easier on you, as well as providing help and motivation to start and finish your estate plan. Here are the a couple of most common types of estate planning professionals who can help you develop and implement a plan:

  • Estate planning attorney: Draws up the legal documents for your estate plan according to your wishes and best interests. May also be able to provide advice on tax law.
  • Financial planner: Helps you develop an estate plan to match your financial and personal goals. Works with you throughout your lifetime to keep your financial goals on track and adjust as needed. Learn more about working with a financial planner; contact or visit our Wealth Management Group to learn how our team of professionals can assist you through this process.
 

Photo: Woman looking at computer. Text: Creating an estate plan is important - but it is equally critical to ensure that it's updated on a regular basis.

 

How to choose an executor

Naming an executor or trustee for your estate is a big responsibility. To reduce the burden on friends and loved ones, consider a neutral third party like the Peoples Bank Wealth Management Group to serve as your executor or trustee. We offer expertise, efficiency, privacy, security, and more. 

 

When and how to start the estate planning process

The answer to when is “now” or “anytime.” It’s never too early or too late to start the estate planning process. Here’s how to get started, with or without professional help:

  • Make a list of all your assets, including: bank accounts, investments, retirement accounts, physical property and real estate, businesses, valuable personal property such as jewelry or antiques, and insurance policies.
  • Make a list of your debts, if applicable.
  • Create your plan. Decide who gets what and identify secondary beneficiaries as a back-up. 
  • Put your plan into action. This will look different for everyone and could involve signing documents, finding a safe place to store them, changing beneficiaries, etc.
  • Update as needed. Over the course of your life, you may need to change or update your estate plan. For example, if you get married or divorced or have a new child or grandchild. Check in once a year and make any necessary changes.
 
Photo: Man by a computer. Text: It's never too early to start the estate planning process. Your plan may be simple early in life and become more complex as you age.

 

What to know about estate taxes

Consult your accounting professional for specific advice on your estate and tax considerations. Here are the main tax types associated with estate planning:

  • Estate / Inheritance taxes: While federal estate taxes only apply to estates greater than $11.58 million (less any lifetime taxable gifts) in 2020, you may also be subject to your own state’s estate or inheritance tax. In Minnesota, for example, families may be concerned about estate taxes due to a $3M state tax exemption and no portability. For these reasons, it is wise to consult with an accounting professional to determine the steps you can take to plan for the future.
  • Gift taxes: This is a tax on money or property given to someone else for free or less-than market value. Annually, you can gift up to $15,000 per person (so $30,000 for a couple) without paying gift taxes. On top of the annual exemption, there is a lifetime exemption of $11.58 million in 2020; however, utilizing this exemption during your lifetime reduces the estate tax exemption you have available upon your death.
  • Generation-skipping transfer tax: A tax on any transfer of property to a non-spouse beneficiary who is two generations or more below you (ex. Grandchildren, great grandchildren, and other individuals who are  at least 37 1/2 years younger than you). 

 

Start your estate plan with the Peoples Bank Wealth Management Group! 

Why go it alone? At Peoples Bank Wealth Management Group, our experienced estate planning professionals are ready to help with all your estate planning and trust needs.  We have the knowledge, tools, and solutions to develop a plan to accomplish your personal goal and objectives.  To learn more or discuss how our team can help you with estate planning, fill out our Quick Contact form or give us a call at (712) 722-0100.

 

Photo: A group of people by a table. Text: Need guidance through the estate planning process? Contact the Wealth Management team at Peoples Bank to get started!

 

Peoples Bank Wealth Management Group does not provide legal or tax advice.  Please consult with your legal or tax advisor in regards to your individual situation.  Investments involve risk including the possible loss of principal.  Investment products are not FDIC insured, not a bank deposit, not guaranteed by the bank or any U.S. Government Agency and principal may lose value.