If you are under 40 years old, the chances of you have thought about, or even pursuing estate planning is pretty small. However, something brought you here, and that means you are on your way to changing the way you look at planning your future!
The exploration of life planning that brought you here is the reason we started doing estate planning for families here at Lilac City Law in the first place. We believe that the best time for you to set up an incredible estate plan is when you are young; maybe even before you have children! So, where we begin this exploration in estate and life planning?
What step do you take first to get you from realizing an estate plan makes sense, protects you and your family, and is something you can do regardless of your asset profile?
Let’s look at the path to estate planning, step-by-step, and help you get prepared to engage with an estate planning attorney who has already established some basic fluency in this topic.
The Most Important Part of Your Estate Plan is Getting Started
Probably the best thing to know about starting an estate plan is the first step can be free. Set up your family estate Plan. This action alone knocks off several of the items we are going to be discussing later in this article. You can do set up your family estate plan here. Moreover, if something happens to you or your family while you are working on the rest of your plan, you will be set up with at least some security.
Read Wear Clean Underwear, It’sAn Excellent Discussion on Estate Planning
We cannot recommend enough grabbing a copy of Wear Clean Underwear. This book breaks down the reasons why you should be considering an estate plan in incredible detail. From the very beginning, you get to choose your adventure and see how common life scenarios play out depending on what estate planning decisions you make. If there is a list of books you should be giving new families, this book should be high on that list.
Estate Plan: The Third Step, Get Familiar with Estate Planning Items
If you completed step 1 above, awesome! Hopefully, you have step 2 bookmarked, now. And now for the third step, review the following fundamental elements of a comprehensive estate plan.
Establish Your Last Will & Testament
When most people think about life planning, and how to set up their family after their passing, they think about establishing a will. A will is often more formally titled, a Last Will and Testament. But what is it? And, why do you want one, or need one?
A Last Will and Testament helps you to direct the transition of your assets to family members, friends, or whomever else after you pass away. It is almost always a formal legal document; however, there are cases where a court has upheld a will etched on to the paint of a tractor, and there are indeed other extreme examples of last-minute wills. For the sake of estate planning, we are sticking to a document you draft with your family and your estate planning attorney though! 🙂
The benefits of a Last Will and Testament are that they can cover items that a living trust may not cover. With a Trust, you are trying to transfer assets without having to go through the process of probate. Probate is costly and can be bypassed to a great extent with estate planning. However, you will not be able to continuously transfer all your assets to a Trust, no matter how diligent you are. A Last Will and Testament will help you here by covering things you have left out of your trust either by accident or on purpose.
In addition to unaddressed assets, a Trust cannot declare who will be the final guardian of your children in the event of an untimely passing. This contingency, in particular, is something your Last Will and Testament will spell out explicitly. Moreover, this scenario is also why you would benefit from working with an excellent estate planning attorney to set it up. Read the book we talked about in step two to see why, for your kids’ sake, this is something you want to work through in extensive detail.
What You Need to Know about Advanced Health Care Directives
An advanced health care directive is a document in which you can set down your end-of-life preferences. You can also appoint someone in your directive to act on your behalf in making health care decisions for you, assuming you cannot make them for yourself.
Without a health care directive, your end of life care may be decided by doctors who do not know you and are unable to get your direct consent to treat (or not to treat).
An advanced directive is also often called a living will.
Establish Your Health & Financial Powers of Attorney
If it comes to pass that you are unable to manage your finances, or direct your self-care, who will take care of those things? If your spouse or partner is your #1 choice, that is a great plan. But, what if they are not able to help you out? Maybe they passed away, you split up, or they are simply out of town when something happens?
Health & Financial Powers of Attorney enable someone you trust to both acts on your behalf financially and in health care decisions for you. These Powers of Attorney (POA) also allow your designee to obtain information on your behalf. We wrote a great article on how this can work well, and how things can go sideways without these documents. It is worth a read, here.
You Need A Family Estate Plan
A Family Estate Plan is not necessarily one static document. Instead, it is probably best looked at as the state of your estate and family planning. Are your kids set up to be taken care of if you pass before they are grown?
While you are exploring estate planning, this is something you want to get set up as soon as reasonably possible. Meaning, to start, we should not make the perfect the enemy of the good. Get a basic family estate plan set up, here. The basic plan will give you and your family some level of protection as you work through the more granular aspects of estate planning.
Eventually, you will want to establish custody rights in your Last Will & Testament. Likewise, you will want to set up how your assets will transfer to your children if that is your desire. Also, you will want to set up many other things with other steps we talk about in this article.
So, step one for kids’ protection, keep them out of the custody of the state, get a guardianship set up here. Step 2 ~ 100, talk to an estate planning attorney.
Don’t Forget Your Final Arrangements Plan
The particulars of your final arrangments are likely to be as unique as you are! However, the broad strokes things you might want to cover and leave in a place where your family can find them, include:
Your desire for what will happen to your body. Do you want your remains to be buried or cremated? Are you ok with embalming?
Do you have a preference on who will be handling your remains for burial or cremation? Have you worked with a specific mortuary in the past? Do you already have arrangments with them to take care of you?
Where will you be buried, interred, or placed? Is there a particular cemetery or location you have in mind? Are there actions you wish to be taken at that event?
If you are a Veteran and want to be interred at a National Cemetery, do you have a copy of your DD214 available and the number for the National Cemetery Administration ready for your family or caretakers to quickly make arrangments?
Have you already made provisions for a casket? Do you wish a certain type of casket or container be used? How do you want this to be paid, if you have not already paid for it? Do you want an open or closed casket funeral, if the choice is available?
Who will be your pallbearers? How do you want to be transported to your final resting place? Who will scatter your ashes, and in what way? Do you have funeral preferences?
Is there a marker you wish placed on your final resting place; a gravestone? Alternatively, a particular engraving to go on whatever marker you have set up?
Your Business Should be Part of Your Estate Plan
If you are a business owner, you might have given some thought to what you want to happen to your business if you are not around to operate it anymore. Even if you have not, it is probably a good idea to establish some contingencies. Exactly how the contingencies are set up will be predicated on many factors, including business structure, partners, debt, industry, products, and a million other things.
The best bet here is to talk to an estate-planning attorney and work through a planning process. What do you want to happen; a transfer of ownership? A sale of the business (who will the proceeds go to)? We are scratching the surface on this issue, but the important thing to remember is that all your plans for your business can be worked out in advance; you just need to start the process today.
Don’t Forget About Your Insurance Policies
Do you have a life insurance setup? We are not writing this article to tell you whether to do so or not; we only want you to be able to help you transfer all your assets and investments where they are supposed to go. To do that, you will need to have a list of your insurance policies ready and the individual procedures and points of contact setup at those policies.
Don’t forget that credit cards and other items that might involve debt often have the option to provide life insurance too! You may have a policy set up that you did not even realize you had!
Regardless, get your plans laid out for your family to work through, get your beneficiaries lined up, and establish a plan for transferring the payout to whomever you wish to designate.
Tax Materials – Uncle Sam Wants to Know
Owing taxes after your passing is maybe the ultimate injury to insult! However, if you own property your property will remain after your passing, and the taxes will too, sadly. Your beneficiaries will need to be instructed on how, when, and whom to pay taxes. They may also need a historical account of your taxes, for any number of reasons.
Itemize Your Investments & Accounts in Your Estate Plan
While you are getting your insurance and tax documents in order, you should be laying out any investments and bank accounts you might have as well. This list will be very helpful for your financial power of attorney, and/or your family when you pass.
It is important to think about this as more than your bank accounts too. Don’t forget 401k, stocks, bonds, bitcoins, IRA’s and other forms of investment.
Trusts are Also Excellent Estate Planning Instruments
We covered Trusts, as they relate to Wills, earlier in this article. In many ways, Trusts and wills seek to fulfill the same ends but by very different means. Whereas a Will grants property and assets to a designee, it is often more open-ended. It is also far more restrictive in updating. Here’s another article that compares the two as well.
If you need to amend a Will, you either have to go through a public court proceeding, or you have to scrap it all and start over. The thing is if you create a Will years or even decades before your passing and you intend it to speak to every aspect of your estate, it will be very open to interpretation. This point is where a probate court will come in, and on top of taking a hefty portion of your estate value in fees, the court will seek to interpret your will. Do you want someone who does not know you to understand the intentions that you put on paper 20 years ago? < This is where a Trust can help and work in tandem with your will.
You can use a trust to pass specific assets on to a beneficiary, bypassing probate entirely. Moreover, if you avoid probate through establishing a trust, you keep the details of your asset profile out of public records. This benefit in itself is self-evident. If you value the potential information on your children’s assets to be kept private from unscrupulous “advisors,” transferring those assets in a trust is one way to go. Can you tell we value privacy?
Lastly, a trust is easy to update, especially in comparison to a Last Will and Testament. A phone call to your estate attorney once a quarter and you will have a trust that is ready to be executed once the parameters you have decreed have been established. You can read more about how a trust is implemented in this article from our blog.
Estate Plan: Contact Sheets
Does your sister in law have your babysitter’s contact information? How about your parents, do they know how to get ahold of your spouse’s cousin who lives next door? It is imperative that you have contact sheets created for key points of contact, and that those contact sheets are readily available.
More to this point, you will want to have a procedure set up for what happens if the way someone learns something has happened to you is that you haven’t come home. Do they call the police first? Do they call your neighbor who knows your children’s guardianship plan and has access to it?
Again, read this book – free with this offer, to see why this is so very important. Then contact an estate planning attorney to get the ball rolling on this.
Passwords & Account Information
How secure is your Facebook account? Does anyone else have your password? Your spouse, your kids? You would probably know because if they did, they would no-doubt be posting practical jokes all the time from your account, right?
Kidding aside, it makes a lot of sense why you wouldn’t share your social media, email, or other account passwords with someone else. Why would you even have a password if you started sharing it? Plus, passwords now have to change often anyway, so keeping a physical and updated copy can be a challenge.
The solution here might depend on your preferences. Whether it is a physical sheet of paper you keep in a safe place, or an Application you install on your smartphone, it is a good idea to have some way for those you care about to be able to access your important accounts in an emergency, or after you pass.
Have you ever thought of storing some cash in your mattress? Ok, well maybe somewhere a bit more secure… The point being, you do not know what will be the emergency that makes your estate plan necessary. In actuality, there may be several emergencies throughout your life that part of your estate plan becomes necessary to address.
Part of what makes a rock solid estate plan so comprehensive is that it addresses as best as possible all those nebulous potentialities. The estate plan is specific where it needs to be, but flexible enough to handle the unknowable unknowns. In regards to flexibility, cash is king.
Cash is immeasurably useful; it is easy to transfer (hand it over). It is accepted universally. It can be easily secured. Also, you do not need anyone’s help to build a small but capable emergency stash, just in case you need it someday. Make sure cash is part of your emergency estate planning, and make sure it is readily available.
A Photographic Itemizations of Assets
This idea crosses over into good insurance practice too. You can describe your assets in great detail, but as it has been said, “a picture is worth a thousand words.”
Keep a photo diary or photo catalog of your assets. It may come to pass that your desire to transfer certain assets might not be as descriptive as necessary if there is some contention. If however, you include a picture of that property, as well as a description of it, you leave a whole lot less up for doubt.
Plus, as we said a second ago, keeping photos of your assets is helpful for insurance purposes too. So, it just is a good, and cheap, safety measure to incorporate into your regular estate planning.
Photos & Recording of Yourself!
While you are thinking about pictures, you may want to put some physical pictures away in a safe too. Or at the least, start uploading them to the cloud via Dropbox. Another option is using several USB sticks.
Why would you want to do this? For your family, your kids in particular. This idea depends on how much you wish to leave behind for your family to know you by. Many families create these digital memories and never need them. They send them with their kids when they leave home or watch them with them at their milestone birthdays; which is also pretty awesome! However, some families will have these become part of their record to their children of who they were when they were alive.
In the end, photos and recordings of yourself are not necessary for your estate plan. But, they are a touching gesture for your family, should you pass.
Store Your Estate Plan in Different Places
Lastly, in our rundown of estate plan musts, store your plan in several places. Or at the very least, store it in one very secure place. This plan is going to be important to your family at some point. If it is when you have passed, you will not be able to tell them where or how to access it, if you moved it.
In fact, you might have lost a physical copy of your plan due to an accident, a fire, moving, or something else. It happens! Keep the details of your plan safe.
The Most Important… Last Piece
One option for this is to work with an estate planning attorney. Once they find out that your plan is necessary, they will immediately become part of the team to triage your needs and the needs of your family. Do you have a guardianship plan, so your kids do not end up as wards of the state? If so, your estate planning attorney will know where it is, how it works, the limits and rights it grants, and how to execute it immediately.
On top of everything else we discussed in this article, having a trusted advisor in the form of an estate planning attorney is the most important “must-have” in this entire article.