You may have been trying to avoid your own proverbial estate planning elephant for some time now, but if the first part of this article attempted to prove anything, it’s that the best way to tackle any challenge is to take it step by step, or in this case, bite by bite. With this approach, creating that much-needed estate plan is decidedly within reach, and any reasons for procrastinating you may still have been clinging to should have been well trampled by now.
Following the tips in last week’s article, you’ve started breaking the chore of estate planning into small, more palatable “bites”, and you’ve already accomplished a great deal. Once you’ve taken stock of your physical assets as well as your intangible property, tallied up your debts, and have asked your agent or advisor to give your annuity and/or life insurance policies a good check-up, you’re well on your way toward a comprehensive plan.
In this article, we’ll discuss the next four tasks you should tackle in your quest to attain your planning goals. You may be feeling rather full, but it’s imperative for you to continue nibbling away at completing your estate plan… or eating that elephant. If you haven’t already done so, now is also a good time to consider securing advice from an estate planning professional who can help shoulder some of the weight. But whether you hire an advisor or continue to go it alone, the key now is maintaining your inertia, preventing procrastination and keeping yourself focused on the real “dessert” at the end of the meal — peace of mind.
5. Develop a current Living Trust
It should go without saying that a well-planned and up-to-date Living Trust is the cornerstone of any good estate plan; in fact, having one without the other doesn’t even make sense. Every adult — no matter how young or old — should have a Living Trust if they care at all about how their property and other assets are distributed after their death. If you don’t already have a trust portfolio in place, get to work on drafting it now.
In addition to naming your beneficiaries and how you’d like your assets distributed among them, you’ll also need to make cautious and thoughtful provisions for the care of your children, and don’t forget your pets. Review and update your Living Trust every two years or so, or any time your life is touched by significant change, such as a marriage, the birth or adoption of a child, divorce or the loss of a spouse or family member. This way, you can ensure your beneficiaries are always up to date and prevent any unnecessary family conflicts.
As part of a trust portfolio it’s also a good idea to create a Living Will, which informs both your loved ones and the medical community of your wishes in the event of a health or medical crisis that renders you unable to make decisions for yourself. For example, do you intend to donate your organs and tissues? If you’re ill and suffering, do you want your physicians to take extraordinary life saving efforts if you code? If you fall into a coma and are pronounced brain dead, do you want your family to keep you on life support, or would you rather they just let you go? A Living Will addresses all of these difficult-to-discuss issues, so creating one and then communicating its whereabouts and general contents to a beneficiary of friend can save your family from having to make some incredibly difficult and painful decisions, all in the hope they’re doing what you would have wanted.
6. Appoint a responsible estate administrator
Having a Living Trust and an estate plan is all well and good, but now you need to choose someone to serve as your trust and estate administrator or executor. Since this individual will bear the responsibility of adhering to all the rules, provisions and wishes set forth by you, it’s crucial that the person you choose to serve in this role not only has a history of demonstrably responsible and ethical behavior, but also the mental fortitude required to make difficult decisions during a difficult time.
Most people appoint their spouse, a sibling, a child, or a longtime friend as administrator or executor, but think very carefully about this decision before arriving at any conclusions. When weighing which of your relatives or children would best fulfill this role, it’s also wise to consider how well such a person might be able to handle the demanding task of administrating your estate while simultaneously grieving your loss. Furthermore, some people may not even want this responsibility, so be sure you ask the person you have in mind if they’d be willing to assume this weighty obligation.
Once you’ve chosen an estate executor/administrator, be sure you provide him or her with copies of all salient documentation they’ll need, including a copy of your Living Trust portfolio and a list of all your assets.
7. Double-check your transfer-on-death designations
Conduct a review of all your accounts, including anything from simple checking and banking accounts, CDs and money markets, to more complicated individual brokerage accounts, to see if they carry what’s known as a “transfer-on-death” feature, which can be common to these types of products. If you ensure the accounts you open have this additional benefit, after your death, whatever funds may be held in that account will pass on to your beneficiaries. This feature allows you to name beneficiaries on the account, as well as stipulate how you’d like those funds to be allocated (by percentage) among them.
It’s often easy to forget account details, especially if they’re on the older side, so you’ll want to contact the institution holding the account to verify that everything is current and appropriate. And, of course, you may want to consider adding this benefit to any accounts that don’t already carry a transfer-on-death provision.
8. Conduct a full review of every other financial account or policy
There is one more vital task you must attend to in order to ensure that all of your true final wishes, desires and directives will be carried out smoothly and peacefully. This is where that list of “intangible assets” you created earlier in the process comes in handy, as this next step is to review the beneficiaries of each and every policy and account you own to ensure they’re up to date and accurate. This is particularly important for your retirement accounts like 401(k)s and IRAs, as these funds will pass via “contract” to whomever you have designated as beneficiaries upon your death — and this supersedes any designations later made in a will or trust. What’s more, it is not uncommon for these types of policies and accounts to be decades old, and oftentimes, so too are the designated beneficiaries. And after all, the last thing you’d want would be for your IRA to go to your first wife inadvertently, especially since you’ve spent the last 30 years raising a family with your second wife, and all because of a simple oversight.
Fortunately, ensuring your beneficiaries are listed correctly is as simple as a telephone call to the customer service departments of the companies holding your accounts or policies and asking them to send you a listing of your current beneficiaries. This can often be done over the phone, but having them send you the documentation is well worth the extra step.
While this is by no means an exhaustive list of the many pieces of a strong and stable estate plan, taking these initial yet important first bites puts you leagues ahead of where you once were. Again, working with a qualified advisor will go a long way toward speeding up and easing the process; at the very least, make an appointment to discuss your plans and approach with a professional.
Remember, as long as you keep at it steadily, the next time you spot an elephant, it’ll be at a zoo.