Estate planning isn’t just for rich people, it’s important for anyone who is of adult age. It’s something we often put off until old age, but I would recommend that the best time to start is now. If there’s anything the pandemic taught us, it’s that nothing is guaranteed.
Your estate planning needs change throughout your life – “starting when you're 18 and legally an adult, then making benefits decisions at your first job, getting married and having kids, accumulating more assets through time, and preparing for the next generation to inherit your estate.”[i] It’s important that you take action in your estate planning at these milestones. Thinking through and planning out these details is one of the best ways you can love your family, so that they do not have to bear the burden of these decisions in the middle of crisis. It’s also an exciting opportunity for you to think about what kind of legacy you want to both leave behind and live out now.
So, what is estate planning?
“Estate planning involves determining how an individual’s assets will be preserved, managed, and distributed after death or in the event they become incapacitated. Estate planning tasks include making a will, setting up trusts and/or making charitable donations to limit estate taxes, naming an executor and beneficiaries, and setting up funeral arrangements.” [ii]
Here are a few simple steps to get started:
1. Take Inventory of What You Have. Make a simple list of what you own and what you owe. This will help you determine who you’d like to gift your assets to.
The tangible assets in an estate may include: [iv]
Homes, land or other real estate.
Vehicles including cars, motorcycles or boats.
Collectibles such as coins, art, antiques or trading cards.
Other personal possessions.
The intangible assets in an estate may include:
Checking and savings accounts and certificates of deposit.
Stocks, bonds and mutual funds.
Life insurance policies.
Retirement plans such as workplace 401(k) plans and individual retirement accounts.
Health savings accounts.
Ownership in a business.
The liabilities in an estate may include:
Mortgage(s).
Lines of credit.
School Loans.
Auto Loans.
2. Consider Who is Dependent on You. What are your family’s current needs and what may they be in the future? There are many roles that you play in other peoples’ lives. It’s important to take note of who will be impacted in the unfortunate event of your passing or incapacitation. Similarly, who you designate to play a role in your estate planning will also be important. You should have conversations with those individuals whom you wish to step into your place prior to them needing to take action. Some of these roles include:
Guardian(s) for your child(ren)
Durable Health Care Power of Attorney
Durable Financial Power of Attorney
You will want to review your beneficiary designations on all your financial accounts to ensure that your money will be used to take care of your family or whoever your intended beneficiary may be. You also don’t want these assets to be tied up in probate if they are incorrectly titled or you name the wrong beneficiary. These will be important to check in on periodically as your life circumstances change.
You may want to consider getting term life insurance if your family is currently dependent on your income. Term life insurance can be a good way to bridge the gap until you can self-insure your family or your children are independent. For in-depth guidance on evaluating life insurance, consider reading our previous article. Even if you’re currently single and no one is necessarily dependent on you, there will be funeral costs, etc. that you may not want to burden your family with.
3. Engage an attorney to create your estate planning documents. Depending on your life stage, not all estate planning documents may be applicable to you. Sometimes a simple will is enough and in other circumstances a trust is necessary. The most common estate planning documents are:
Revocable Trust
Will
Power of Attorney
Advance Health Care Directive
4. Host a family meeting. Once your estate planning documents are drafted, you’ll want to communicate your plan to the necessary parties. While you don’t have to disclose everything about your estate plan (i.e., account balances, etc.), it is important that you make your family aware of where these documents are being held and who to contact if needed. Although the nature of this topic can be somber, this can also be a great opportunity for you to express your intentions and your hopes for your family.
5. Make a plan to review your estate. One of the biggest mistakes we see clients make is creating their estate planning documents, tucking them away, and never looking at them again. As stated above, your estate planning needs change as your life moves forward. Perhaps your children are no longer minors or you’ve had a change in relationship status, or you’ve accumulated more assets; it’s important that you make sure your estate planning documents match your new life circumstances. If it has been a while and you want support in reviewing the relevance and accuracy of your estate planning documents, as well as your tax and investment situation, we offer a Legacy Planning analysis service.
6. Pursue a Living Legacy. Something that we often talk about is how to live your legacy today instead of waiting to leave a legacy after you pass. Here’s a great article on how exploring regret can help us be more present and intentional people. We always encourage our clients to take care of the future, so that you can live fully with peace of mind now.
Please note that the list above is not comprehensive, and you should engage a professional to walk you through your specific situation. If you’re looking for support on where to get started or a trustworthy referral, please don’t hesitate to reach out and set up a complimentary introductory call with us.