Financial Planning

Put an Estate Plan in Place

Begin with the basics, starting with a will. You may even be able to use an online will-writing program.

Here’s a statistic that will raise a few eyebrows: The number of adults younger than 35 who have a will increased by nearly 70% over the past year, reports Caring.com in its 2021 Wills and Estate Planning Study. The study cites COVID-19 as a major factor in this burst of estate-planning interest, which wasn’t limited to young adults. “Last April and May, the traffic on our website went through the roof,” says Betsy Simmons Hannibal, senior legal editor at Nolo, the publisher of do-it-yourself legal products. “Estate planning is one thing you can do in anticipation of a serious issue.”

It’s especially critical for women, who statistically tend to be the survivors. But people can be intimidated by the process, and many are understandably reluctant to face mortality.

My advice: Begin with the basics, starting with a will. If your situation is straightforward, you may be able to use an online will-writing program. If your affairs are more complicated, however, or you don’t feel comfortable doing it yourself, consult a lawyer who specializes in estate planning. “You might be able to arrange a free initial meeting at which the lawyer will tell you what to think about or provide a questionnaire that helps you pull things together,” says Virginia McArthur, a retired estate-planning lawyer in Washington, D.C., and author of Let’s Talk About Estate Planning.

A will lets you put your wishes in writing rather than allow the state to distribute your property—and potentially have family members fight about it—after your death. And couples who are not married need a will to make sure a partner inherits property. (Note: A health care directive is also essential, especially if you or a family member is facing an illness.)

Red flags and stumbling blocks. In addition to making sure you have a will, pay particular attention to how you own property. “That can be a huge red flag,” says McArthur. For example, joint ownership often makes sense for married couples, but one caveat is that you or your spouse may be able to make decisions about that property without the other’s consent.

And if you are paying the bills for an elderly parent or relative, it’s not generally recommended that you make yourself co-owner of a bank account. “If the issue is getting access to the account to pay bills, it’s better to use a power of attorney,” says Simmons Hannibal. “Then the assets will go back into the parent’s estate.”

You can also use a transfer- or payable-on-death desig­nation for the account. But if you are the beneficiary and your parent intended to treat you and your siblings equally, “that can be a big or small problem, depending on the size of the account and whether you trust each other to fix the problem after Mom dies,” says McArthur.

One of the biggest stumbling blocks in making a will is naming a guardian for minor children. Once you and your spouse have agreed on a solution, make sure whomever you’re naming is willing to take on the role. And review your choice every few years.

It’s also crucial to review and update beneficiary designations on things such as insurance policies and retirement accounts. That’s especially important for women. Beneficiaries named on such documents always take precedence over individuals named in a will. Your spouse’s life insurance, IRAs and 401(k)s should list you as the primary beneficiary—not your mother-in-law, your spouse’s ex-wife or children from a former marriage (unless you have agreed to the arrangement).

When toting up your property, don’t forget about digital assets, accounts and passwords. Says McArthur: “The main thing to understand is that where your assets go is a puzzle with a lot of parts.” Be sure all of the pieces fit.

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