The best way to get things done is to simply begin.
My brother died unexpectedly at the age of 63. While his health wasn’t great, his passing caught us off guard. We were sure he had several good years left.
Determined that my family not suffer from the Shoemaker’s Children Syndrome, where the shoemaker is so busy making shoes for his customers that his own family goes without, I made sure that my single brother, divorced several years ago, had his financial affairs in order. Being somewhat of a procrastinator by nature, he was inclined to put this off, but once we finished, he acknowledged that he was glad to have his wishes documented and that it was not as painful as he had imagined.
I cannot overemphasize how comforting this has been to our family. Saying goodbye and mourning a loved one’s passing is hard in the best of circumstances. I can only imagine the added stress it would have caused not to know what he wanted for his burial and services, and how he wanted his assets distributed.
Many people put off estate planning for lots of different reasons: they’re too busy, they think they have plenty of time, they believe they don’t have enough assets to worry about it, they’re confused and don’t know who can help them, or they just don’t want to think about death.
Believe me when I tell you that one of the greatest gifts you can give your family is to take care of this while you’re alive and well. Leaving them to pick up the pieces and guess what you would have wanted is unfair to them and may not end as you would have liked.
So, where do you begin? Estate planning may look slightly different from one person to the next, but generally, the following will cover the bases and be immensely helpful to those you leave behind.
- Inventory your belongings. Make a list of your assets, including everything from your home to vehicles, collectibles, bank accounts, investment accounts, insurance policies, and retirement plans. Everything. And note who owns them and who the beneficiaries are, if any.
- Write a will. Your will designates the executor, who will be responsible for carrying out the provisions of the will, as well as designating who will inherit your assets. A will should also name a guardian for your minor children should you and their other parent both die. If you die without a will, you leave it up to the state to determine who should receive your assets.
- Make a living will. Sometimes called an advance directive, a living will is a legal document that provides instructions regarding the medical care you wish to receive should you become incapacitated or seriously ill and can’t communicate your preferences yourself.
- Consider a trust. Trusts may be established in your will or during your lifetime. Trusts may be revocable or irrevocable and do not necessarily save taxes. In most cases, trusts identify who controls assets, who receives income from those assets, and who inherits them. At the time of death, trusts also offer greater privacy and ease of distribution to beneficiaries.
- Prepare a Durable Power of Attorney. This document gives a trusted person authority to handle your finances and property if you become incapacitated and unable to handle your affairs.
- Double check your beneficiary designations. The beneficiary designations on IRAs, annuities, life insurance policies, and certain other retirement plans define who will inherit the account, and supersede any other instructions, including your will. It is important, therefore, that these designations are up to date and reflect your current wishes.
- Get your digital assets in order. Most of us now have online accounts, including email, Facebook, online banking, PayPal, etc. Make a list of all of your accounts along with logins and passwords – or ideally, use a reputable password manager – and give someone you trust the authority and instructions to access and handle your digital assets after your death.
- Address estate tax obligations. At the federal level, only very large estates are subject to estate taxes. For 2022, up to $12.06 million of an estate is exempt from federal taxation. Some states have lower estate tax thresholds than the federal amount. A few states also levy inheritance taxes. Understand and know your state’s laws around this so that you have your bases covered.
- Make final arrangements. Make your final wishes known regarding organ and body donation and disposition of your body – burial or cremation.
- Store your estate plan paperwork in a safe place. Now that you’ve done the hard part, make sure everything is stored safely and that your loved ones and/or your executor know where to find them. If you have access to a secure online vault, use it to keep your important documents and, again, share your login information with your trusted contact.
Estate planning takes some time and requires contemplating a future when you won’t be around. It also requires spending a little money.
However, it allows you to take control of what happens to your assets, determine the legacy you want to leave, and it helps make things a little easier for those you love during what will undoubtedly be a difficult time for them.
We recommend that you work with your financial advisor and your estate attorney to determine the proper course of action to meet your goals and circumstances, as well as to ensure that your estate documents conform to legal requirements.