What is Estate Planning?
Estate planning is the process of making a plan for the benefit of your loved ones when something bad happens to you. This form of planning allows you to ensure that your wishes are followed long after you are gone. Some may feel they don’t have enough money to worry about an estate plan, but nearly every person has someone they love and things that need to be handled when something bad inevitably happens.
Some essential aspects to consider when moving forward are planning to provide financial support for loved ones, naming a guardian for minor children, minimizing tax implications for loved ones, and providing instructions regarding your health should you become incapacitated or are close to passing away.
What is the First Step in the Estate Planning Process?
The first step is what you are doing right now! Becoming acquainted with the different types of plans you can create and then taking inventory of what you have. You will learn about Wills, Trusts, Powers of Attorney, and Advance Directives for Healthcare, to name just a few tools estate plans employ. Learn what you can about the types of plans to have a better idea of what you think you may want before talking to a professional, but don’t close your mind to the possibility of a better option.
Part B of step one is to take inventory of what you own. This inventory should include both tangible and intangible assets. Generally you want to know what your most valuable tangible personal items are like your cars, electronics, jewelry, artwork, etc. Note: You don’t need to itemize every single article of clothing you own! Estimates are just fine.
Intangible assets will include bank accounts, stocks or bonds in your name, ownership of businesses, and more. Also included in this category are 401(k)’s, IRAs or other retirement accounts, and life insurance policies that you may carry.
Gathering documentation that shows the value of these items can be particularly helpful. This may require you to estimate the value of some things to be included, which, again, is perfectly fine. Having an estimate (or documented proof if you have it) of your liabilities is also beneficial. Providing an active list of creditors can help those looking after your estate to ensure each party has been accurately notified of your passing.
Choose Medical and Financial Helpers
If you become incapacitated, you want to ensure that your medical decisions are handled according to your wishes. By appointing healthcare agents, whom we refer to as your Medical Helpers, you can put your loved ones at ease by supplying them the knowledge that you’ve already made some tough decisions before something bad happens. You ensure that a trusted individual can oversee tough decisions on your behalf so that the family doesn’t feel burdened with those difficult choices during a difficult time.
Similarly, you will want to choose financial agents, or Financial Helpers. These persons will ensure your financial obligations are handled while you are incapacitated or unable to make sound decisions. Responsibilities can include filing taxes, managing bills, overseeing real estate transactions, taking over operations of business duties, funding assets to your trust, handling claims or litigation, and more.
It may be attractive to think that a good idea would be to have multiple people assigned to work collectively together on these decisions. In our experience, when multiple signatures are required to make a decision, the process is always prolonged. Some of your Helpers will be asked to make decisions with short windows of time to act, so consider choosing individuals who can make quick, but also correct, decisions under pressure.
Prepare an Assets List
Building off of step one, by preparing an all encompassing list of your assets and liabilities, you can create a clean perspective for those Financial Helpers regarding how assets will be divided upon death. This list may need revisions to remain current as life unfolds, so it is essential to consider what revisions may be necessary after the birth of a new child, divorce, new assets are added, and more.
This list can be a reference for interested parties to be notified of assets to be left to them and how to handle the transfer at the appropriate time. Are they the beneficiary? Is it an account that was transferred on death? Are there necessary or timely steps that they need to take to ensure the assets are protected?
Review Beneficiaries/Contingent Beneficiaries
As discussed above, it is essential to review all assets to ensure a beneficiary is listed and the party is notified. Go through each account or policy and make sure that no beneficiary information is left blank. You can also include a contingent beneficiary on some items to help ensure assets are transferred to appropriate parties should something happen to the beneficiaries. Play the “What If…?” game as many times as is needed for you to feel comfortable with your list. What if my only child passes away? What if my children and all their children have passed away? What if my spouse passes before me?
Some beneficiaries may need updating. As life changes, outdated beneficiaries may be listed on accounts you’ve had for a long time. Similarly, as life progresses, it is important to review beneficiaries and list contingent beneficiaries as new family members are incorporated or divorces occur. We recommend reviewing your estate plan every 2 to 3 years with people you trust.
Create a Will And/Or Living Trust
Creating a Last Will and Testament helps you define your wishes clearly and allows your loved ones to enforce them legally. This document is included as part of the probate process, which can be time consuming and costly. However, clearly defining your wishes in a will can help to speed up this process much more than if one was not in place upon your death.
A living trust is another option that many of our clients choose. Contrary to what Hollywood suggests, a trust is not exclusively for individuals with vast generational wealth and lavish estates. Very simply, a living trust is like a special box where you can keep all your important things like your money and property. By putting your assets into this box, and leaving specific instructions about the contents of your box, you can eliminate the need for the court to get involved. This allows for a quicker distribution of assets and, in almost every case, fewer costs for your loved ones.
You can think of your trust as a way to keep your important things safe, to manage them the way you want, and then to give them to the people you want, when you want and how you want. A trustee is selected to manage the trust according to your wishes and ensures that assets and liabilities are handled appropriately. An irrevocable trust is another option that can allow the trust maker to minimize tax implications for the family.
Final Steps in Estate Planning
You can think of estate plans as either being proactive or reactive. If you prefer the proactive and more “hands-on” approach, consider a trust. If you prefer more of a reactive or a “wait-and-see” approach, a Will may be right for you. Regardless of which approach you choose, store all your critical documents in a safe place and notify your Helpers where that information can be found. No need to give them their own copies so long as they can find your plan when the time comes to enact it.
It is also helpful to understand that you may want to review your plans every two or three years to ensure that the same information still applies and is current. You may wish to review your estate plan even more frequently if you have many moving pieces, or your life situation changes substantially.
Work With a Trusted Estate Planning Attorney
Discussing your options with an experienced estate planning attorney is imperative to determine which approach best suits your family and your circumstances. While you may have an excellent idea for your plan, be open to a new possibility that may be better suited to your family that you had not yet considered. The estate planning process is certainly not a one-size-fits-all approach. Each family is different. Each situation is different. Assets can significantly vary, and therefore the needs that you have are specific to you and should be treated as such.
Call our office today at (770) 889-3911 to learn how we can assist you and your loved ones with your unique estate planning needs.