You Have a Will – Is It Time for an Estate Plan?
An estate plan takes your will a step further to account for more than just your possessions. It provides clarity to your estate and can help head off potential future family battles.
Most people have a will. But a simple will often doesn’t cover some complex issues facing your heirs, which is why I recommend an estate plan.
I work with doctors, accountants and other professionals, small-business owners and people getting ready to retire. They may have a will and a trust for their children, but an estate plan answers three fundamental questions:
- What you want to happen after you pass away;
- Why you want it to happen;
- Who will ensure it happens.
Most people have legal documents that answer the first question; in addition to a will, these include powers of attorney, a health care directive and trusts. But these documents rarely explain the intent or reasons for choosing to give money, property and other assets to some people and not others.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
An estate plan provides clarity about each heir to your estate. And this can be particularly important if the deceased person had multiple marriages and families. In addition, with a plan in place, you and your heirs will likely pay substantially less in taxes, fees and court costs and avoid nasty family battles over your assets after you are gone.
Here are four tasks you’ll need to complete to get started:
1. Make a Current Statement of Net Worth
This is a complete list of all assets, debts and life insurance. Assets will range from houses and personal property to retirement and bank accounts. Debts will include any loans – a mortgage, home equity, car or credit card debt.
Include the approximate value of each asset as well as the current owner(s) and any beneficiaries. For example, it’s likely that a married couple will jointly own their house. But when it comes to retirement accounts, 401(k) or individual retirement accounts, most will be in the name of each individual.
It’s vital to account for every asset, even some of the smallest ones. For example, in a California case, two siblings spent almost 10 years in court and over $750,000 on legal fees in a dispute over who should inherit their father’s surfboard. If the father had spelled out the heir in his will, they would have likely avoided financing an attorney’s vacation home!
2. Write Letter of Intent and Instruction
After a person has died, disputes often arise. Even if a particular piece of property is given to one person, other heirs often will argue that “Mom and Dad really wanted me to have it.”
Writing a letter that explains the reasons — and the intent — for choosing to give a particular asset to a person can forestall needless family strife and legal challenges. If possible, the letter should provide as many details as possible. For example, if you have decided to give an heirloom or other sentimental piece of property to only one person, state the reasons and intent behind this gift.
3. Choose the Right Decision-Makers
Several people may play key roles in enacting your estate plan, including the executor, as well as possibly a trustee and guardian.
The executor, who will serve as your personal representative, often has a complex role. They will need to make important, time-sensitive decisions while the burden of losing a loved one weighs on their emotions. Because of this situation, it may be difficult for a spouse to carry out these duties.
If the estate plan includes a trust, a trustee can be chosen to oversee it if your heirs may not have the financial ability to properly manage millions of dollars or other new assets. If you don’t know someone who can fill this role, consider a professional, such as a bank or corporate trustee.
The guardian will have legal responsibility for any minor children. If you have minor children, this position requires the most forethought and consideration. The guardian will in many ways be stepping into the role as parent.
If you would like your children to attend private schools, and a life insurance policy provides them the money to do that, the trustee and guardian will work together to carry out your wish. Also, any instructions should provide context to help the trustee and guardian make the best decisions. For example, if you provide funds for a car that provides “reasonable comfort,” it could mean a Honda Accord for one person and a Mercedes-Benz to another.
Once you’ve decided on a person for each role, speak with them prior to signing your legal documents to ensure they understand their responsibilities.
4. Make Regular Updates to Your Plan.
Review your estate plan at least every five years and at “milestone” events, such as marriage, divorce and new children. Also, make certain to regularly update beneficiaries and potential decision-makers.
Unfortunately, many people work hard to develop a plan, but even after several years, fail to update important information. Work with your financial adviser to ensure your estate plan is implemented. Otherwise, an estate plan that gathers dust over years is an expensive pile of paperwork.
To continue reading this article
please register for free
This is different from signing in to your print subscription
Why am I seeing this? Find out more here
Jason Cross is a wealth adviser at McGill Advisors, a division of CI Brightworth. He works with high-net-worth families in investment management and estate planning and helps business owners develop financial plans to sell their businesses. Jason is a Certified Financial Planner™, Certified Trust and Financial Advisor and an active member of the Georgia Bar Association.
-
Is a Phased Retirement Right for You?
Want to keep working, just not as hard? A phased retirement may just be the answer.
By Kimberly Lankford Published
-
Four Tips to Make Your Sales Presentation a Winner
Being prepared and not being boring can go a long way toward persuading a potential customer to buy into what you’re offering.
By H. Dennis Beaver, Esq. Published
-
Four Tips to Make Your Sales Presentation a Winner
Being prepared and not being boring can go a long way toward persuading a potential customer to buy into what you’re offering.
By H. Dennis Beaver, Esq. Published
-
Pros and Cons of Waiting Until 70 to Claim Social Security
Waiting until 70 to file for Social Security benefits comes with a higher check, but there could be financial consequences to consider for you and your family.
By Patrick M. Simasko, J.D. Published
-
Now Could Be Time for Private Investors to Make Their Mark
The venture capital crunch may be easing, but it isn't over yet. That means there could be direct investment opportunities for private deal investors.
By Thomas Ruggie, ChFC®, CFP® Published
-
How to Stop Boredom From Ruining Your Happy Retirement
Retirees who explore new interests and have an active social life are more likely to find joy — and even greatness — in the newfound freedom of retirement.
By Richard P. Himmer, PhD Published
-
The Life-or-Death Answers We Owe Our Loved Ones
How our life ends isn’t always up to us, but that question too often must be answered by loved ones and health care workers who don’t know what we would want.
By Joel Theisen, RN Published
-
Hot Tips for Home Buyers and Sellers Right Now
Real estate looks to be especially hopping this spring, thanks to pent-up demand and buyers adjusting to higher mortgage rates. Here’s how you can prepare.
By Pam Krueger Published
-
Is 100 the New 70?
Eating well, exercising, getting plenty of sleep and managing chronic stress can help make you a SuperAger. Funding that long life requires longevity literacy.
By Phil Wright, Certified Fund Specialist Published
-
Nine Lessons to Be Learned From the Hilton Family Trust Contest
Disclaimers, good communication, post-marital agreements and more could help avoid conflict in a family after the owners of a wealthy estate pass away.
By John M. Goralka Published