Estate Planning Roadmap

What is Happening in February:

Well, the Puxataune Phil saw his shadow, six more weeks of winter! Hope you remembered your sweethearts on Valentine’s Day, and the Chinese New Year brought us the year of the tiger. And according to the Old Farmer’s Almanac, this month will be colder and wetter than, normal for us. So cuddle up and stay warm!

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Estate Planning Roadmap

You worked hard to build a life for yourself and provide for your loved ones. Along the way, you may have accumulated a few “things” in life, too. For example, there may be the home where you live, the vehicles you drive, and the financial savings and investments that provide for needs such as food, clothing, and shelter. Life is good.

What if something untoward happened to you today? Would everyone you love and everything you have be okay tomorrow? If you can answer that question with a confident “yes,” then congratulations. That means you have taken the time to create an estate plan. If you answered “no” or a not-so-sure “yes,” then where do you start?

As a matter of personal responsibility, only you can create an estate plan now to protect your loved ones and your things later in a future world without you. Not only can a well-designed estate plan help you do just that, but it can even make things better for you should you ever become incapacitated.

If you do not have a last will and testament, you will die intestate. That means all your assets subject to probate (e.g., assets that do not otherwise pass to a surviving joint owner, by a beneficiary designation arranged to avoid probate, or titled in a trust) would pass to your family members according to state law, not according to your instructions.

How do state intestacy statutes work? While the specific statutory scheme for each state may vary when it comes to who inherits what, when, and how much, the inheritance generally flows, based on the “degree” of family relationship. In fact, for those who have only very distant relatives, the state may inherit everything. The legal term for this is escheat. While this is an extreme outcome, intestacy’s “unintended consequences” are not uncommon.

A court cannot enforce alleged verbal promises. You need to create an estate plan to ensure your wishes are followed. For example, what if you are an only child with no children of your own by birth or adoption? Your parents are deceased. You have a long-term relationship but have not married. Depending on the laws of your state, your significant other might receive nothing from your estate if you die intestate. Yes, the state treasurer where you live might inherit all of it.

Are you still not convinced? In the absence of an estate plan, the backup parents for any orphaned minor children you leave behind will be selected by a judge who likely does not even know you and your family. The potential consequences of this oversight could impact your family for generations.

Estate Planning: 8 Basic Steps

Most people want to create an estate plan, but they do not know where to start. Here is an essential roadmap to help:

1. Decide what your needs are. You might want to set up a plan to provide financial support for your children through college. Another person might have poured her energy into building a successful business. She will want the firm managed correctly, were she incapacitated or deceased. A couple might want to avoid estate taxes. Make a list of what you want to accomplish with your estate planning.

2. Talk with your attorney about the legal documents that will be a good fit for you. For one person, a last will and testament might do the trick. Only a revocable living trust for someone else will afford all of the protections he wants.

3. Gather the full legal names, dates of birth, and locations of the people who will be your beneficiaries. For example, your documents should say something like, “to my son, Will Blake Adams, who lives in New York City, NY and was born on January 1, 2000,” rather than merely “to my son.”

4. Make a list of all your assets, including account numbers and contact information, for your financial advisor or plan administrator. Your attorney needs to know about all your current assets to ensure everything necessary is included in your estate plan. While identifying your retirement accounts, pensions, military benefits, or insurance policies, do not overlook the details about your debts, like your car loan, mortgage, and student loans.

5. Compile essential legal documents. These documents include car titles, real estate deeds, and insurance policies. You should keep these papers together. This will help you get financially organized now and make the estate planning tasks more manageable when needed.

6. After creating and signing your estate planning documents, make several copies and put them in safe places. Share them with your accountant or financial advisor. Estate planning is best approached as a “team” sport, with each team member included when it comes to your professional advisors. You should also either provide a copy to the person who will administer your estate plan or tell that person where you keep your legal documents.

NOTE: Do not keep your estate planning documents in a safety deposit box. Why? When needed, your family might need a court order to open the box. If your estate planning documents include information about your funeral and burial, it will be too late when the box finally gets opened.

7. Talk with the person you designated to administer your estate plan. If you made unequal provisions for people within a group, write a letter or talk to them about why you did so. For example, if you have a child with special needs, you might use a more significant share to fund a special needs trust and give a smaller portion to your other child. There should be no surprises one day when you pass.

8. Talk with the decision-makers you appoint in your financial and medical powers of attorney. Make sure they know your wishes, should you become incapacitated.

State laws vary. Depending on your situation, you may require additional steps in your estate planning process.