The Covid pandemic has been an unavoidable reminder of life\u2019s fragility.\u00a0 No matter how much caution we take, we\u2019re all at the mercy of the universe and our fortunes and health can turn in an instant.\u00a0 As financial planners we have the somewhat unfortunate privilege of working with and educating clients on the critical importance of estate planning, the process of proactively planning for life after your incapacitation or death.\u00a0 We say\u00a0\u201csomewhat unfortunate\u201d\u00a0because many people, ourselves included, find it hard to have deep conversations surrounding being impaired or passing away.<\/p>\n\n\n\n
For this reason, it can be easy to put off\u00a0addressing\u00a0the estate planning\u00a0gaps\u00a0in\u00a0your financial plan; Why have all these tough conversations about life and death when you can just have another chat with your advisor about the stock market?\u00a0\u00a0 The consequences of neglecting an estate plan however are too high.\u00a0 No other part of the financial plan directly impacts your loved ones as much as your estate plan and no other part of the plan can protect your wishes, provide care for your minor children and ease the strain on relationships left behind.\u00a0 If family isn\u2019t enough motivation,\u00a0then yes,\u00a0you may be able reduce taxes as well!\u00a0Sometimes referred to as family planning, estate planning is a broad and comprehensive subject so we\u2019ll provide a range of matters that, depending on your life circumstances, you should be giving consideration as part of your overall financial plan:<\/p>\n\n\n\n
\u00a0 You\u00a0most likely.\u00a0 The word \u201cestate\u201d can throw people off.\u00a0 It sounds\u00a0too\u00a0exclusive\u00a0as if it\u2019s only for the\u00a0ultra-wealthy. Rest assured, you don\u2019t need to own a fleet of cars and boats\u00a0or\u00a0have a moat around your home to warrant an estate plan. Whether you\u2019re young, single and in the early stages of your career, married with minor children or on the\u00a0backside\u00a0of your career and have built up some wealth, there are measures you should be taking that make it easier for your loved ones to handle your affairs during a time of grief.\u00a0<\/p>\n\n\n\n Take a moment, at least every couple of years, to look around and inventory\u00a0all of\u00a0your assets (both tangible and intangible).\u00a0 Your house and any other real estate, vehicles, collectibles & possessions, bank accounts, investment accounts, insurance policies and retirement plans are some of the key items likely to end up on such a list.\u00a0 It\u2019s always good to have a relatively current sense of what\u2019s in your estate.\u00a0 It\u2019s also important to take assessment of what\u2019s important to you and what you want to leave behind.\u00a0 Answering questions like: Who do I want to provide for and protect? What kind of legacy do I want to leave behind? Are there any charitable intentions with my assets?\u00a0 Asset Titling & Naming Beneficiaries<\/strong>\u00a0<\/p>\n\n\n\n It\u2019s super important to keep the beneficiaries of your accounts and assets updated and current.\u00a0 A great place to start is with your retirement and insurance accounts as these investments will always ask for beneficiary designations and, for these accounts, these directives can outweigh what\u2019s in a will.\u00a0 Simply put, you want to make sure the right people get your stuff.\u00a0 Don\u2019t leave your beneficiary and contingent beneficiary selections blank (and left to the mercy of probate and state law) and don\u2019t let too much time pass without making sure these selections are up to date.\u00a0 We have seen scenarios where an ex-spouse has been mistakenly left as the beneficiary on retirement accounts and insurance policies.\u00a0 Trust us that this news\u00a0will not<\/em>\u00a0help your current spouse in the grieving process.\u00a0Similar to\u00a0beneficiary designations, if you have shared\/joint accounts with someone else it\u2019s important to understand how those accounts are titled and what it means.\u00a0 <\/p>\n\n\n\n Titles have specific legal meanings and often take precedence over wills and trusts.\u00a0 Because your circumstances are bound to change over time, it\u2019s important to occasionally re-confirm that your account titling accurately reflects your current intentions for those assets.<\/p>\n\n\n\n \u00a0 Naming someone to act for you in the event something\u00a0were\u00a0to happen is a key part of any complete estate plan.\u00a0 There are several types of Powers of Attorney (POAs) and directives that can authorize someone to act on your behalf.\u00a0 They include:\u00a0<\/p>\n\n\n\n Medical Care Directive – allows you to state your wishes for medical care should you become unable to make those decisions in real-time.\u00a0 You can also designate someone as your medical power of attorney and grant them the authority to make health and treatment decisions on your behalf.\u00a0 Such a directive could carry extra weight for unmarried partners in certain instances as laws could prevent anyone not a legal spouse or next of kin from making such decisions.\u00a0<\/p>\n\n\n\n Financial Powers of Attorney – Can be comprehensive or limited in scope and allows you to designate someone else to manage your financial affairs if you become unable to do so.<\/p>\n\n\n\n This seems obvious but it\u2019s extremely important to consider to whom you\u2019re assigning these responsibilities and it may be wise to engage multiple people for financial and medical representation.<\/p>\n\n\n\n \u00a0 Not everyone needs life insurance (i.e.\u00a0if you\u2019re single with no children or dependents) but for many of us, it\u2019s going to be a foundational part of our estate plan.\u00a0 Having life insurance in place will be instrumental in making sure our\u00a0family is\u00a0cared for in the event of our death.\u00a0 The death benefit of a life insurance policy can help to replace your income, pay financial responsibilities like the mortgage and to fund future responsibilities like your children\u2019s education.\u00a0Insurance proceeds can also be used to cover medical expenses, pay estate taxes* and, if you\u2019re a business owner, cover outstanding expenses and loans of the business while bridging some stability.\u00a0*At the federal level, only very large estates are subject to estate taxes.\u00a0 In 2021, up to $11.7 million will be exempt from federal estate taxes but several states have their own estate and inheritance taxes that could impact your situation.<\/p>\n\n\n\n \u00a0 Wills help to accomplish things like specifying how you would like your assets distributed after your death, naming a guardian if you have minor children and providing direction during probate.\u00a0\u00a0\u00a0A simple\u00a0revocable trust\u00a0is\u00a0similar to\u00a0a will,\u00a0in that it specifies\u00a0how we want our assets distributed,\u00a0but with some\u00a0additional benefits.\u00a0\u00a0At death,\u00a0assets\u00a0that pass via a trust\u00a0bypass the\u00a0probate court which means you can avoid the costs and delays associated with the probate process.\u00a0 Additionally, assets that pass via\u00a0trust do not become part of the public record therefore providing privacy around\u00a0your affairs and\u00a0because\u00a0trusts are created under contract law vs. testamentary\u00a0law\u00a0they tend to be less contestable if someone in your life takes issue with your final wishes and sues your estate.\u00a0\u00a0\u00a0A revocable trust is just one type of trust.\u00a0 Trusts\u00a0can be set-up to accomplish all sorts of goals some common ones are to: protect disability benefits for a special\u00a0needs\u00a0beneficiary, control the distribution of assets to young adults who may not yet be responsible enough to manage a large inheritance, creditor or\u00a0divorce protection and to minimize estate taxes.\u00a0\u00a0As\u00a0a\u00a0baseline it\u2019s advisable for everyone to have a\u00a0will\u00a0and\u00a0then consider if a trust can provide needed (or desired) additional levels of control.<\/p>\n\n\n\n \u00a0\u00a0\u00a0 Everyone should give some consideration to their estate plan regardless of age, net-worth or marital status.\u00a0 Failing to plan for how your\u00a0assets and liabilities will be handled after your death can put a burden on the loved ones you leave\u00a0behind, who will already be dealing with the emotional toll of losing a loved one.\u00a0 Start by asking yourself \u201cWhat-If?\u201d and then \u201cWhat would I want to happen?\u201d.\u00a0\u00a0 At a minimum, make sure the beneficiary designations on your life insurance and retirement accounts are\u00a0up-to-date\u00a0with your objectives.\u00a0 Draft a Will to handle the other stuff including specifying who you would want to look after minor children.\u00a0\u00a0With a basic understanding of\u00a0trusts,\u00a0talk to your financial advisor or an attorney to see if you could benefit from\u00a0one.\u00a0 Above all, don\u2019t avoid the topic out of fear, procrastination or\u00a0discomfort \u2013 your family is too important.\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":" The Covid pandemic has been an unavoidable reminder of life\u2019s fragility.\u00a0 No matter how much caution we take, we\u2019re all at the mercy of the universe and our fortunes and health can turn in an instant.\u00a0 As financial planners we have the somewhat unfortunate privilege of working with and educating clients on the critical importance… Read more 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Who needs an estate plan?<\/strong>\u00a0<\/p>\n\n\n\n
Take Inventory & Identify Goals<\/strong>\u00a0<\/p>\n\n\n\n
<\/p>\n\n\n\n
Establish Directives<\/strong>\u00a0<\/p>\n\n\n\n
Life Insurance<\/strong>\u00a0<\/p>\n\n\n\n
Wills and Trusts<\/strong>\u00a0<\/p>\n\n\n\n
Conclusion<\/strong>\u00a0<\/p>\n\n\n\n