Reviewing Your Financial And Estate Planning Checklist
POST WRITTEN BY
President & CEO of Wealth Planning
As we wrap up a season of joyous feasts and a copious amount of family time, it’s a perfect time to remember how important family is, as we are aware that we will not be here forever. It may be a somewhat sensitive topic, but it is one of the most important discussions to have, and many members of the family are involved, which may complicate the process. That being said, it is better to have your family’s estate in order well before it is necessary if you want to make life easier for your heirs upon your passing.
Now, you may be thinking to yourself that you are too young to start thinking about estate planning, or you don’t have significant assets to make the process of planning worth your while. The truth is that everyone needs estate planning, because it is more than just passing your assets off to whomever you would like. The bottom line is that if you have any form of asset, and you intend to give that asset to a loved one, you need to have a plan. Let’s take a look at some important topics to cross off your checklist to begin the new year.
After taking inventory of your possessions, including your home, vehicle, stocks, life insurance policies, etc., there are many steps you will need to take to protect these assets -- and yourself. There are many steps and documents that advisors will suggest you put into place immediately for your protection.
The first of these is a durable power of attorney for property, finances and health care. By creating these documents, you will appoint a trusted individual to make decisions and take action on your behalf with matters relating to the above.
Say, for example, the major assets you and your spouse own are in stocks and your residence. The home is owned jointly, but the stocks were purchased in your name only. You become incapacitated and require medical treatment that is above your available emergency fund or any other liquid assets you own jointly. Technically, your spouse would not be able to sell the stocks to pay for your medical fees. This would not be an issue if the stock was jointly owned or you had a durable power of attorney for finances. This is a common mistake many couples make, but it is a simple fix if caught in time -- prior to incapacitation.
In addition to the importance of having all powers of attorney readily available in the event of you becoming incapable of making decisions, beneficiary designations should also be reviewed frequently to account for familial changes, additions and so on. There are a few ways to direct your remaining assets. The first would be to simply review beneficiaries on all assets that are able to have such designations, such as an IRA or 401(k). These designations are set when an account is opened, but how often are they revisited? It is critical to review these often, as family additions and separations can occur.
The next would be a living trust. Living trusts must be implemented for sound transfer of assets for those assets that do not have written designations in the first place. A trust will give direction as to where and how the remaining assets are dispersed once you pass away. The most attractive reason to use a living trust is that the assets that are left do not pass through probate court, which is not only expensive, but your final wishes may not be carried out in the way you wanted.
Imagine you are in a car accident and instantly slip into a coma. You do not have any estate planning procedures in place. Who will take care of your intended medical directives? Who will continue to pay your bills and make sure your finances are in order? In addition, who will care for your children and home? If, God forbid, you should pass away, where do your assets go? You have just created a mess beyond your death and will end up costing your heirs a fortune out of pocket -- and possibly their relations with each other as well.
I want to leave you with a last bit of advice that I see many of my clients overlooking. As the world is trending toward a digital future, it is also important that your heirs have access to digital files, passwords and documents. This goes unnoticed many times and should be laid out clearly for your heirs to access.
As we start to think about the unknown of future events and what may happen to us, our families and our loved ones, it becomes about more than just how much our estate is worth or who "should" get which assets once we pass. If we do not plan for these somewhat uncomfortable topics, the outcome will be devastating to our heirs.