Estate planning can be an uncomfortable topic for many people causing them to put it off for as long as possible. However, when people don’t put their financial affairs in order, it makes their friends and family deal with potentially complicated and stressful situations. Investing some time and money now will help families avoid stress and confusion and quite likely reduce unnecessary taxes and fees.
Create a will if you don’t have one. Many people never get around to creating a will. When you die without a will, how your possessions get distributed is determined by your state’s laws. The state would also have to select an executor. This is a time-consuming and potentially expensive experience for your family.
A will drafted by an estate planning attorney may cost you a few hundred dollars, but it may prove to be the best money you have ever spent. A valid will may save your heirs from costly headaches linked to probate and ambiguity. It is also important to review your will every 5-10 years, as things may have changed since it was drafted. If you would like recommendations for high quality, affordable estate planning attorneys, please let us know.
Complement your will with related documents. What if you don’t die quickly? For many people, there’s a period when they are incapacitated prior to death. During this period, you will likely need to have someone else handle your finances or make medical decisions on your behalf. These responsibilities are delegated using durable financial and medical powers of attorney forms which can also be prepared by an estate planning attorney. You should know that a living will is not the same thing as a durable medical power of attorney.
A living will makes your wishes known when it comes to life-prolonging medical treatments, and it takes the form of a directive. A durable medical power of attorney authorizes another party to make medical decisions for you (including end-of-life decisions) if you become unable to make these decisions. These are important to have updated every 5-10 years due to potential changes in state law.
Review your beneficiary designations. All insurance policies, retirement accounts and IRAs give you an opportunity to name beneficiaries. At Kendall Capital, we encourage you to revisit your beneficiary designations every few years and are happy to verify current designations and provide forms to make necessary changes. It’s important that your beneficiaries match what your will or trust dictate since these designations will trump the legal documents you had prepared.
For example, if you die with an old 401k plan with no beneficiaries, the default is your current spouse. If that’s your second wife, and you thought your kids would inherit that account, they’ll have to argue it in court.
Transfer-on-Death designations are an efficient way to provide beneficiary designations for your non-retirement accounts. Not only does this simplify the inheritance process but it avoids the need to establish a separate estate account and go through the probate process.
Create asset and debt lists. You should provide your executor and/or power of attorney with a summary of your assets and debts, so that they will be aware of the details of your wealth.
One list should detail your personal property like real estate, land, vehicles – anything with a title. Note the value of the asset, if it’s owned in your name or jointly, and if there’s a loan against it. Another list should detail your financial accounts, stock certificates or shares held directly, plus any insurance policies. The third list should detail your credit card debts, mortgage and/or HELOC, and any other outstanding consumer loans. It’s also helpful to keep a list of passwords handy to access your financial institutions. Keep this information in a safe place where your power of attorney can access it.
Think about consolidating your investment and bank accounts. Consolidation means fewer account statements, less paperwork for your heirs, and fewer administrative fees. Tax time is a good time to think about this because you’re aware of all the financial institutions who send you dividends and distributions. If you would like to discuss consolidating your accounts with Kendall Capital, please give us a call.
Talk to the professionals. Do-it-yourself estate planning is not recommended, especially if your estate is complex enough to trigger financial, legal, and/or emotional issues among your heirs upon your passing. No matter your age or wealth, these are all good reasons to create and maintain an estate planning strategy.