Yes, the morbid title was intentional. As I sit here with a bowl of ice cream I cannot think of a better setting and time to talk to you about your estate plan. I should not be surprised when clients come to me with an estate plan in place. You would also think the events of the past year and this tragic pandemic would lead to more planning. To some extent it has, at least with young adults. According to the 2021 Wills and Estate Planning Study by Caring.com, the number of young adults with a will increased by 63% since 2020. However, the overall percentage of Americans with a will has not significantly changed, and 2 out of 3 adults do not have a will.
That means you, your parents, your children, or someone you know has yet to get their affairs in order. I cannot emphasize enough the powerful impact having a plan in place makes. Perhaps you’re young, think you have time, or you will do it soon. Perhaps you think it is expensive or you do not have enough assets, so you do not need one. No, you need this NOW! At this point I am yelling at you. Yelling from a place of love of course. A place of care, a place of: don’t run in front of that car or that pan is really hot!
No one knows when it’s their time. No amount of kale or exercise will save us from the time that comes when it comes. My older brother passed away at age twenty-eight. Twenty-eight with absolutely no warning, no symptoms, no accident, and as you might have guessed where this is going… no estate plan. The shock this brings to a family and the incredible grief is enough of a burden. Having to comb through assets and identify what is where and handle the probate process is the last thing a grieving parent should have to go through. That being said, let’s get your plan in place.
Six things to do BEFORE you’re six feet under. What should you do to get that estate plan in place?
- List out all your stuff
Make a list of all the valuable things you own. This includes retirement accounts, banking accounts and even your debts. Do you have a mortgage? How much is the balance? What is there and where is it? If you passed away tomorrow, what would your heirs need to know? Money under the mattress? Coins or collectibles in the closet?
- Review your account titling and beneficiaries
This one might seem like a simple one, but it is the most overlooked. I have had colleagues, other financial planners, that have gone years without thinking about this and then realized the beneficiary on their work’s life insurance policy was their ex from eight years ago. How is your banking or investment account held? Will your joint holdings pass directly to the joint owner and avoid probate? Is this even what you want, or should it be going to their estate and only a percentage change hands? This is where you might start to see the value in pulling in a financial advisor to start talking about the strategy needed to accomplish what you want.
- Select a responsible estate administrator
This is a tough one for some people. Who can you trust, but also place such a burdensome responsibility? If you have been an executor, then you know this can be a time-consuming task and depending on family dynamics it could get complicated. Do not assume your child is able and willing to take this on. Have a conversation with this person. If you pick someone and they do not want to perform the task it might fall to someone you did not want or end up creating more issues. There are corporate or professional personal representatives as a possible option. Sometimes the situation calls for the responsibility to be removed from the family members.
- Draft a will
This may seem simple as well, but there might be a lot to consider. Do you leave things to your heirs equally or fairly, and what does this mean to you? Should your son that needs more support be given more in the estate, or do you give more to his siblings for the extra support you have already given so much of? What assets are best to leave to what heirs from a tax standpoint? Is there property that should be sold? Or consider the opposite, property you only want sold as a last resort? Maybe there are things that might be of sentimental interest to a certain heir. This is also a great place to be sure to appointment primary and a few contingent guardians for minor children. It might also be pertinent to provide some instructions on things you would like to emphasize about how your children are raised. What if the guardians you choose end up divorced and remarrying? What rules do you want in place for your minor children as far as lifestyle, religion and education are concerned? Perhaps you want to take care of a pet for its life or ensure certain steps happen. Really think about the longer term with this. You might discover your will is something you need to pull experts in on to make sure the structure is in place.
- Review if you might benefit from a trust
This really follows from the thoughts you have in step 4. Perhaps the things you want to have happen have started to become more complex. This is where you might need the help of a financial planner to discuss if you need a trust or not. By going through the discovery process with a financial planner, you might uncover that you simply need account titling and beneficiaries and everything you have will avoid probate and all is well. However, you may find you need a trust. This can be a simple trust to stipulate instructions and avoid probate. Or you might be someone who has an estate that can benefit from some more complex tax strategies to take advantage of the currently high estate tax exemptions.
- Complete the essential estate documents – powers of attorney, healthcare proxy, living will
What happens if you are in an accident and wind up in a coma for a couple of months? Who will make your healthcare decisions? Who will pay your insurance and mortgage? Will they pull the plug after a month or after 30 years? This one is not the most pleasant matter to review and think about, but is a source of potential risk for everyone. We have all heard of some of the famous cases of people like Terri Schiavo, whose parents disputed her husband’s assertions and challenged her medical diagnosis. Having to visit with the in-laws for holidays is a lot as it is, pitting them against your spouse in a time of serious tragedy is something no one wants. Get healthcare proxies, set up financial and medical powers of attorney, and write your wishes about end-of-life care in a living will.
Here I also put a note of caution. Having an agent via power of attorney does not remove rights from the principal. The agent cannot overrule the principal. Third parties might want more proof and updated items. This can be good or bad. Trusts might also be helpful to remove some of your ability to take actions that harm yourself. You can choose the rules to determine if you are incapacitated and then trigger the successor trustee to have more control, so you are not causing harm to your own well-being.
Preparation and Planning
These are six big things you can do to prepare. Prepare for things that happen during your lifetime and beyond. Estate planning is not about being rich. It is about formalizing a plan that takes care of you and your family in the ways that you want. A plan that provides everyone comfort and clear guidance in the midst of uncertainty. The best part: no one needs to tackle this alone. In fact, this is one of my favorite things to talk over with clients. These are the things that have a larger impact on people, on families. Having a plan in place can make a powerful difference. Okay, it’s your turn. Get started, get these six things crossed off your list!
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