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Estate Planning Basics Roadmap
You worked hard to build a life for yourself and provide for your loved ones. Along the way, you may have accumulated a few “things” in life, too. For example, there may be the home where you live, the vehicles you drive, and the financial savings and investments that provide for
needs such as food, clothing, and shelter. Life is good.
What if something untoward happened to you today? Would everyone you love and everything you have be okay tomorrow? If you can answer that question with a confident “yes,” then congratulations. That means you have taken the time to create an estate plan. If you answered “no” or a not-so-sure “yes,” then where do you start?
As a matter of personal responsibility, only you can create (or keep up to date) an estate plan now to protect your loved ones and your things later in a future world without you. Not only can a well-designed estate plan help you do just that, but it can even make things better for you should you ever become incapacitated.
If you do not have a Testament, then you will die intestate. That means all your assets subject to probate (e.g., assets that do not otherwise pass to a surviving joint owner, by a beneficiary designation arranged to avoid probate, or titled in a trust) would pass to your family members according to state law, not according to your instructions.
How do state intestacy statutes work? While the specific statutory scheme for each state may vary in who inherits what, when, and how much, the inheritance generally flows, based on the “degree” of family relationship. In fact, for those who have only very distant relatives, the state may inherit everything. The legal term for this is escheat. While this is an extreme outcome, such “unintended consequences” of intestacy are not uncommon.
A court cannot enforce alleged verbal promises. It would be best if you created an estate plan to make sure your wishes are followed. For example, what if you are an only child with no children of your own by birth or adoption? Your parents are deceased. You have a long-term relationship but have not married. Depending on the laws of your state, your significant other might receive nothing from your estate if you die intestate. Yes, the state treasurer where you live might inherit all of it instead.
Are you still not convinced? In the absence of an estate plan, the backup parents for any orphaned minor children you leave behind will be selected by a judge who likely does not even know you and your family. The potential consequences of this oversight could impact your family for generations.
Estate Planning: 8 Basic Steps
Most people do want to create an estate plan, but they do not know where to start. Here is a basic roadmap to help:
1. Decide what your needs are. You might want to set up a plan to provide financial support for your children through college. Another person might have poured her energy into building a successful business. She will want the firm managed correctly, were she incapacitated or deceased. A couple might want to avoid estate taxes. Make a list of the things you want to accomplish with your estate planning.
2. Talk with your attorney about the legal documents that will be a good fit for you. For one person, the last will might do the trick. For someone else, only a revocable living trust will afford all of the protections he wants.
3. Gather the full legal names, dates of birth, and locations of the people who will be your beneficiaries. For example, your documents should say something like, “to my son, Will Blake Adams, who lived in New York City, NY and was born on January 1, 2000,” rather than merely “to my son.”
4. Make a list of all your assets, including account numbers and contact information, for your financial advisor or plan administrator. Your attorney needs to know about all your current assets to ensure everything important is included in your estate plan. While identifying your retirement accounts, pensions, military benefits, or insurance policies, do not overlook the details about your debts, like your car loan, mortgage, and student loans.
5. Compile essential legal documents. These documents include car titles, real estate deeds, and insurance policies. You should keep these papers together. This will help you get financially organized now and make the estate planning tasks more manageable when needed.
6. After creating and signing your estate planning documents, make several copies and put them in safe places. Would you please share them with your accountant or financial advisor? When it comes to your professional advisors, estate planning is best approached as a “team” sport with each team member included. You should also provide a copy to the person who will administer your estate plan or tell that person where you keep your legal documents.
NOTE: Do not keep your estate planning documents in a safety deposit box. Why? Your family might need a court order to open the box when needed. If your estate planning documents include information about your funeral and burial, it will be too late when the box finally gets opened. For Maryland clients, we recommend filing the will at your County Register of Wills Office.
7. Talk with the person you designated to administer your estate plan. They can be helped greatly by some basic programs were conduct on being an executor. If you made unequal provisions for people within a group, write a letter or talk to them about why you did so. For example, if you have a child with special needs, you might use a larger share to fund a special needs trust and give a smaller portion to your other child. There should be no surprises one day when you pass.
8. Talk with the decision-makers you appoint in your financial and medical powers of attorney. Make sure they know your wishes, should you become incapacitated.
State laws vary. Powers of Attorney, beneficiary designations, and Health Care Directives are all important parts of the process. These should be tailored to your situation by an experienced estate planning attorney.
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