Real Estate Planning Checklist: 5 Key Steps

Updated May 7, 2024
8 min read
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What happens to your stuff after you pass away? Who has to deal with bills and taking care of your house? How should your family sell your belongings when you’re no longer able? Real estate planning can be a time-consuming, lengthy process. However, it protects your family members from legal complications that may arise from taking care of your estate after you pass away. 

Any legal adult of sound mind who owns real estate should take time for real estate planning. If you have business real estate, you will also need to to set up a real estate business plan. You can always consult a professional estate attorney for guidance. However, having a general real estate planning checklist in 2023 can make the process easier and keep your legal interests safe.

1. Last Will and Testament

Creating a last will and testament can be an intimidating process, but we have developed an easy to use template to help you start organizing your thoughts. Before real estate planning, you should clearly identify the individuals who have the right to inherit your property and assets upon your death. Your property includes both intangible assets (such as investment and bank accounts) and physical assets (such as personal possessions and real estate).

If you have a home or other real estate, it is essential that you make a real estate plan for whom you would like to inherit your house or other real estate. You may choose whomever you wish to be your beneficiaries, and this could be your children, relatives, friends, or anyone else. By taking the time to do both your real estate planning and financial planning, you can save your beneficiaries a lot of headaches down the road. 

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2. Revocable Living Trust

A revocable living trust is a legal tool that gives you the opportunity to transport assets from yourself to your beneficiaries upon death. There are many types of trusts depending on your goals. Trusts have numerous benefits, including possibly allowing your heirs to avoid paying inheritance tax. 

A trust is not absolutely necessary, but establishing a revocable living trust can be very advantageous, as your heirs may be able to avoid the additional cost and time of probate. The probate process can be quite complex, expensive, and highly time-consuming in states like California.

Creating a trust will be a key part of your real estate planning as your trust can own your real estate on your behalf, so it is easily able to pass from you to your beneficiaries. If you wish for your trust to continue to provide benefits for your beneficiaries in the form of payments on real estates, such as rent, your real estate business plan will likely need to have a trust involved. 

There are some important steps you should take to establish a trust. You should create the trust document, sign it, and notarize it. While creating the document, you should select a successor trustee who will manage the trust after your death. After signing the documents for estate planning, your property can be transferred to the trust. Many individuals who own a business or have a large estate rely on revocable living trusts for their wealth management and real estate financial planning.

3. Beneficiary Designations

Most financial institutions have forms for certain assets that allow for transferring these assets directly to the named individuals, altogether avoiding the probate process. These are called beneficiary designations. The assets can be directly given to the chosen beneficiaries after your death. They are known as non-probate assets and include things such as pensions, life insurance policies, and 401(k) accounts.

Your will does not have to include these non-probate assets. If it doesn’t, it becomes vital to update your beneficiary designations and keep them up to date, as these individuals will be directly receiving the non-probate assets upon your death.

A real estate planning attorney can help you determine which assets may be best transferred as non-probate assets. Depending on your entire estate plan and how you choose to do your real estate tax planning, there are specific assets that are better suited to be transferred this way. 

4. Advance Healthcare Directive

In addition to your real estate planning, you will need to take into account your medical wishes. An advance healthcare directive (AHCD) is a legal document reflecting your wishes as to the nature and extent of the healthcare treatment you would like to receive towards the end of your life and who should make the decisions when you are unable to do so. An AHCD has two primary components: a power of attorney (POA) for medical care and a living will.

The living will clarify the details regarding your preferences for healthcare, such as medical treatment options and medications. With age or if you have certain medical conditions, you may not be able to make these decisions as the condition worsens. It is in your best interest to make these documents early. 

Part of the process is selecting a healthcare agent to act as your POA for medical care. This person will have the ability to make all decisions concerning your medical needs when you are unable to do so, but they will be bound by the requests in your living will. Completing an advance healthcare directive (AHCD) is an essential part of your real estate financial planning and your real estate business plan. Remember to take into account your medical wishes while creating the other necessary documents for your real estate planning. 

5. Financial Power of Attorney

Like a medical POA, a financial POA is an authorized legal adult appointed to make decisions relating to property and finance management on your behalf. The POAs can regulate bank deposits, manage your real estate and bill payments, and assist with your real estate tax planning. 

You can choose a financial agent who will handle your finances related to medical bill payments and assistance for your family. Financial and healthcare agents work closely together to ensure that the medical care provided is adequate and affordable.

A real estate planning attorney can help you determine who may be the best choice for these roles. Creating a financial power of attorney can give you peace of mind that someone you trust can make financial decisions for you when you are no longer able to do so.

Bonus Step: Proof of Identity Documents

Documents to be used as proof of identity will need to be organized and put together in a single location. Organizing these documents as a part of your real estate planning in an area where your family will know where to find them is one of the most critical tasks. These documents include birth certificates, social security cards, divorce decrees, and marriage licenses.

  • Financial details and insurance policies
    You may have purchased insurance policies for your health, life, home, and/or car as a part of your real estate planning. Ensure that you have these relevant insurance documents organized and easily accessible. Your financial accounts must also be identifiable, especially in times of emergency. Other relevant documents may include information regarding your pension, mortgages, bank accounts, real estate financial planning documents, and investment portfolios.
  • Assign death designations transfer
    If you die intestate or without a will, a majority of your assets will likely need to go through probate. The probate process may be very time-consuming and costly, and your assets may not go where you would have liked them to. However, certain assets such as CD accounts, savings accounts, and brokerage accounts may avoid probate. 

    If you have these accounts, you may be able to add a beneficiary designation or a transfer-on-death. Beneficiaries will then be able to obtain these assets after your death without going through probate. Determining which assets can be passed on this way will be an essential part of your real estate planning to ensure your real estate is taken care of as a first priority.

  • Retirement account review
    Policies and accounts with designated beneficiaries, such as retirement accounts, will directly pass to those beneficiaries upon your death. Depending on how you set up your real estate planning, this may or may not be your best option. Connect with your accounts' customer service representatives to verify your current beneficiary selections. Assess every account to ensure that the chosen beneficiaries are properly listed. This is especially important to do in situations involving divorce or remarriage.

What To Do Once You Have Your Documents

After going through your real estate planning documents checklist and arranging all your documents, make sure you store them in a safe, readily accessible location. This location should be easily accessible by at least a few friends or family members. You may even wish to give them a copy of these documents in certain circumstances. You should make sure your healthcare agent at least has a copy of your healthcare documents to ensure they can make the necessary decisions quickly without the added pressure of finding real estate planning documents.

Remember that there are many qualified and highly skilled estate attorneys to help you through the real estate planning process.

1. Create a list of memberships

If you are currently a member of an organization, like AARP, a college alumni group, or a veteran’s association, you should create a list of these organizations and keep it in the same place as your real estate planning documents. 

In some cases, you may have an insurance policy with a bank that you are unaware of until you pass away. By keeping a list of your real estate planning documents, your family can find all of the benefits they are entitled to.

Include other charitable agencies for which you have worked. Let beneficiaries know about these charities to avoid any real estate planning problems in the future. 

2. Assemble a debt list

You should also create a separate list of any financial obligations and open credit cards with balances due. This list should include items such as mortgages, auto loans, and equity lines of credit. You should also write down the contact information of the companies that you owe a financial responsibility to. This is a very important part of your real estate financial planning, as it allows your family and loved ones to know who to contact and who may be contacting them. It will help them avoid any fraudulent calls and requests.

Additionally, you should list all your debit and credit cards, especially those you use regularly.

Conclusion

Don’t delay in making your simple estate planning worksheet. Thinking about what happens after you pass away is difficult for many people, but with just a little bit of planning on your part, you can save your family and friends a lot of headaches down the road. You will also live with peace of mind knowing that your property is going to be taken care of. Without an estate plan in place, your assets may end up in the wrong hands. Hire an attorney to help guide you through the real estate planning process according to 2023 legal rules.

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Frequently Asked Questions

What does a proper estate plan include?

Your last will and testament, living will, and healthcare directives are essential for a successful estate plan. In your real estate planning, you can also include the documents you use to control the distribution of your assets. A trust works for these legal matters.

What is the first step in estate planning?

First, understand the scope of your assets. Review your financial accounts, your real estate, and any other property in your possession. Even if you think specific types of property aren’t essential, they may play a significant role in your real estate planning.

What is a 5 by 5 power clause in estate planning?

A 5 by 5 power clause is a specific clause used in a trust document that is intended to enable the beneficiary to make certain withdrawals as needed. The amount that can be withdrawn is either $5,000 or 5% of the fair market value of the trust assets, whichever is greater.

Wealthy individuals with large amounts of money and potentially irresponsible beneficiaries may want to include the 5 by 5 power clause, as it sets parameters for the accessibility of the funds. For instance, a trust owner can create a rule that under the 5 by 5 power clause, the funds will be available for the beneficiary solely for educational purposes. Including this type of clause with the advice of your real estate planning attorney may help you ensure your real estate financial planning will operate the way you intend it to after your death.