By Brian Ellenbecker CFP®, EA®, CPWA®, CIMA®, CLTC®
Historically, planning to avoid paying estate tax when you pass away was a top-priority discussion for many families. However, estate taxes currently apply only if you have an estate worth more than $11.7 million (and twice that if you are married). Obviously, that means most people don't need to worry about estate taxes today. However, the main purpose of estate planning is simply making sure that things unfold the way you want them to.
Top Ten Estate Planning Things to Address that are Unrelated to Taxes:
- Make sure your beneficiary designations on your retirement accounts, insurance policies, annuities, employee benefits, etc. are current. This is especially important if a life event recently occurred, such as marriage, divorce, birth of a child, or death of a family member. These are instances where you may want to change who is named as the beneficiary. Beneficiary designations supersede instructions put forth in a will or trust, so it’s important to ensure they are aligned with the rest of your estate plan. While naming a trust as a beneficiary can be appropriate in certain circumstances, avoid naming “your estate” as a beneficiary. Doing so can lead to problems for your beneficiaries that could have been avoided by naming them directly.
- Your assets should be titled properly. Proper titling can help you avoid probate, assist with the management of the asset, and ensure family members have appropriate access to the funds at death. If you created a revocable living trust, consider re-titling some, or all, of your assets into that trust for administrative purposes. Doing so will help with the management of the assets in the event of your death or incapacity.
- Make sure someone can manage your property if you are unable to. Many times, the most important estate planning document may be a well drafted power of attorney. A financial power of attorney allows you to name an individual who would manage your affairs if you were to become incapacitated and are unable to make financial decisions. If you have a revocable living trust and named a successor trustee, that individual would take over the management of any assets owned by the trust.
- Name someone to make end-of-life and other medical decisions for you if you are unable. Having a health care power of attorney allows you to name individuals who can make medical decisions on your behalf, should be unable. Having both a financial and health care power of attorney in place is an important step to having your affairs in order.
- Have a living will/advance medical directive in place. Living wills and other advance directives list instructions regarding your preferences for medical care if you are unable to make decisions for yourself. They guide choices for doctors and caregivers if you're terminally ill, seriously injured, in a coma, in the late stages of dementia, or near the end of life.
- Make sure you have an up-to-date will. If you have minor dependents, you will undoubtedly want to name a guardian rather than allow a court to choose someone. In addition, if you have a blended family or non-traditional family, wish to make charitable bequests, or would simply like your assets distributed in a specific way, you will need a will. Even if you have set up a revocable living trust, a will is still needed to compliment that document and deal with items not addressed or owned by the trust.
- Consider whether a trust might have a place in your estate plan. If you have individuals that you would like to provide for, but you find you are hesitant to leave them assets outright for some reason (minor children, spendthrifts, protection from creditors/divorce), a trust may be an appropriate solution.
- Review your insurance needs and make sure you have appropriate insurance. Not everyone needs insurance, but too often people don’t make conscious decisions about life insurance, disability insurance, or long-term care insurance. Having the proper coverage helps ensure your family will be taken care of in the event something happens to you.
- Consider drafting a letter of instruction. This is not a legal document, but rather a letter that tells your survivors where to find things, who to contact for various things, and any other information they will need that they may not know. This may be particularly important for single people or those in families where one person has handled all the finances, etc. and others may not be as knowledgeable in those areas.
- Host an annual “family meeting.” Communicating your estate plan, your wishes for your family, and your beliefs and values can be a valuable part of the estate planning process. This keeps the lines of communication open, allows you to instill your values and beliefs onto the next generation. A family meeting helps set realistic expectations on what to expect when you’re gone. This is one of the most effective steps to make sure your heirs don’t fight after you are gone. The reading of the will is not the time to find out they have been disinherited or otherwise treated differently than they expected. It may be advantageous to begin gifting while you are alive, so your heirs can make their desires known. Very often people don’t know the emotional attachment their children (or others) may have to some item. Giving things away prior to death also allows you to see your heirs enjoy what you give them. If you would like to learn more about hosting a family meeting, contact your Shakespeare advisor. We can help you plan the agenda and even facilitate the meeting for you.
Bonus tip: If you missed last month’s blog on adding adult children to bank accounts, you can read it by clicking here. Avoid the temptation of the easy fix by just adding a child as a joint owner. It might save time or be cheaper now, but oftentimes your heirs are left to deal with the unintended consequences.