Although most of us gravitate toward working out more and eating less come January 1, one of the most beneficial new year's resolutions of all may be creating or refining your estate plan. Intrigued? Let’s talk about legacy planning.

First, we should probably revisit why estate planning is important. Indeed, whatever your age or how much money you have in your checking account, legacy planning — particularly a trust-based plan — can help your heirs sidestep complicated tax and legal issues as well as avoid a potentially costly, lengthy probate process.

With thoughtful planning — and essential documents in place, you can map out the legacy you wish to leave, be it as simple as transferring assets to loved ones or as complicated as caring for minor children and dependent elders or providing resources to a beloved charity or cherished alma mater.

In other words, by putting a plan in place, you may give yourself (and your loved ones) peace of mind in the new year — and beyond.

5 steps to creating an estate plan

The simpler a resolution, the easier it may be to keep. And while crafting an estate plan may seem daunting at first, it’s an achievable goal, especially when you tap the right resources for insights and guidance.

So, to help you along as you tackle the preservation of your personal and familial legacy, the RBFCU Trust Services team offers these five simple estate planning steps.

1. Evaluate your financial situation

Would you like to know a secret? Estate plans may seem distinct, but they’re actually an important part of your overall financial well-being. You might even regard an estate plan and its component parts as the capstone of your overall financial plan. That’s because they can:

• Help transfer assets (including heirloom pieces or collectibles)
• Put measures in place to care for loved ones
• Address estate tax issues
• Potentially settle debts

With that reality in mind, you can see why this first step to estate planning — capturing the details of your financial situation — can be helpful.

To get started with this step, take pen to paper (or keyboard to spreadsheet) and compile a comprehensive list of your assets and debts. This inventory will not only give you a better understanding of where you stand financially today, but also help you calculate your net worth.

Each list will reflect the person making it, but the following details are common ones to jot down:

Assets

• Banking and investment accounts
• Valuable personal property (e.g., jewelry, collectibles, motor vehicles)
• Retirement plans
• Life insurance
• Real estate holdings

Debts

• Credit cards
• Auto loans
• Personal loans
• Student loans
• Mortgages

» Tip: Do you anticipate being the recipient of an inheritance, benefiting significantly from the sale of a property or business, or otherwise experiencing a significant increase in your net worth? If so, you might want to jot that information down as well. Even if you don’t have firm numbers yet, those are details worth keeping in mind as you plan your legacy.

2. Determine your beneficiaries

Anyone named in your estate plan as an heir is considered a “beneficiary.” Many people choose their spouse, children or even a charity to inherit their belongings when the time comes.

While this personal decision may seem easy, understanding particular implications and how certain assets are distributed can be quite complicated. There are legal restrictions, for instance, on what minor children can inherit and how.

Yet by taking active steps to get the paperwork in order in the new year, you can make things easier on your heirs and perhaps help them avoid a costly, time-consuming probate process. Creating a list of your beneficiaries and reviewing the tax impacts and distribution methods with qualified professionals is a big step toward ensuring your wishes are carried out when you’re gone.

» Tip: It's important to remember that beneficiaries can be named in an estate through a variety of different ways. Yes, wills and trusts are effective tools, but you may want to consider naming a beneficiary (or beneficiaries) on your financial accounts, including savings, checking and IRAs. Moreover, because named beneficiaries on those types of accounts take precedence over heirs listed in other documentation, you may want to make changes to existing named beneficiaries at different points in your life.

3. Develop a contingency plan

After you’ve determined the value of your estate and mapped out a draft plan for its distribution to your beneficiaries, take time to consider possible issues — both seen and unforeseen — that may come up.

This brainstorming will help you develop a contingency plan for your wealth, health care and heirs. Contemplate what might happen if you (or close living relatives) were to become seriously ill and need care. How would you want to provide for them?

Think through, too, whom you might name as a contingency beneficiary if a primary beneficiary were to predecease you.

4. Preserve your estate plan with the right documents

Once you’ve got a clearer picture of your assets and beneficiaries, it’s time to think about the tools you’ll need to use to support your objectives. Below are common documents one might find in an estate plan:

• Will
• Trust(s)
• Durable power of attorney
• Health care power of attorney
• Beneficiary designations on select accounts (e.g., life insurance, retirement, banking)
• Guardianship designations

If you haven’t already done so, this is the step in the estate planning process where it may be helpful to think about building a team of professionals to assist you. They can help you draft your plan, tend to it over time and represent you and your beneficiaries when the time comes for your assets to be transferred.

» Tip: In search of a good place to find support for this step, particularly if you plan to create a trust-based estate plan? RBFCU Trust Services offers not only trust administration and estate settlement services but also can provide referrals to other estate planning professionals (e.g., attorneys, CPAs, accountants, wealth management teams and financial advisors) who can help you refine your plan and document it.

5. Schedule time now to adapt your legacy plan later (or as needed)

Once you have established your estate plan, schedule time on your calendar to review it regularly. Depending upon the size and complexity of your estate, you may wish to look at your plan annually or every few years.

In addition to making routine adjustments, note that you may want to update the documents after key life events, such as (but not limited to):

• Arrival of a new child or grandchild
• Marriage or divorce
• Death of a beneficiary
• An inheritance
• A change in careers
• The purchase of a house, land or vehicle
• Significant gains or losses in investments
• The creation, sale or closure of a small business
• Changes in federal or state estate or tax laws

The takeaway

Although it might not be the first thing to come to mind when you think “new year’s resolution,” dedicating time to craft or refine your estate plan has potential advantages. Even if you’re of modest means, mapping out your legacy wishes, documenting them and making plans to update your estate plan documents can bring you and your loved ones comfort in the future.

Along the way, RBFCU Trust Services is here to help, where and how we can. Central to our work are professional trust administration and estate settlement services.