A Guide to Estate Planning
By: Tracy E. Travis, CES™ - Estate and Trust Planner
Many acknowledge they are in need of an estate plan yet struggle to actually put a plan in place. In fact, a recent 2021 study by caring.com found that only 32% of adult Americans have a will or another type of estate plan in place. The study also points out that the majority of those that do have documents in place are 55 and older.
We often hear from clients that the reason they have delayed putting estate documents in place is they did not think they needed them until they were older. Many also believe estate planning is only for the very wealthy. However, your estate includes assets such as your home, car, bank accounts, investment accounts, retirement accounts, and other personal possessions. So really all adults, young and old, should have some form of estate plan in place. That being said, there are various degrees of estate planning and what your estate planning requires is specific to you. Your plan many be very simple and only require a few documents, in addition to making sure you have beneficiary designations in place. Others may have more complex estates and need advanced tax planning and estate planning techniques.
Ready to start putting your plan together? Here are a few things you should consider.
Your estate plan acts as a guide and specifies your wishes to loved ones if you become incapacitated or pass away. A well thought out plan can significantly reduce the time, cost and burden on loved ones when taking care of your affairs. Some of the documents you should discuss with an experienced estate attorney are:
- A Last Will and Testament – A will is used to give instruction regarding the distribution of assets upon death. A will names an executor, who is responsible for probating the estate assets, which involves paying debts and expenses and distributing the remaining assets in accordance with the deceased’s wishes under the supervision of the probate court. A will also names a person as guardian of minor children.
- Health Care Directives - These include a Living Will and Health Care Power of Attorney. A living will provides your instructions regarding life-sustaining treatment. A Health Care Power of Attorney grants authority to your named agent to make health care decisions upon your incapacity and also grants access to your protected health information.
- Durable Financial Power of Attorney – This document grants your named agent the authority to act on your behalf in the management of your property and financial affairs. This can be set up to be effective immediately or can become effective upon your incapacity.
- Trusts – There are several types and not everyone needs a trust. However, trusts are an important document for many, and you should consult your estate planning professional to see if a trust makes sense for your estate plan. Some of the reasons to use a trust are to control assets after death, provide for minor children, provide for a blended family, minimize estate taxes, protection from creditors, and planning for incapacity. Trusts can also provide protection of privacy. Unlike wills that are often public record that anyone can access after death, living trusts are not filed with any court.
Easy but important steps …
An easy and equally important piece of estate planning is adding beneficiary designations to retirement accounts, insurance policies and brokerage accounts. This can usually be done by filling out the correct beneficiary designation form with the custodian where the account/policy is held. Beneficiary designations supersede instructions in your will and allow these assets to pass to the beneficiaries without going through probate. At minimum, name a primary beneficiary, but also consider naming a contingent beneficiary when possible in case a primary beneficiary passes away before or at the same time as you. When appropriate, consider electing “per stirpes” which allows a named beneficiary’s share to flow through to their heirs if they predecease you.
You should also add Pay on Death (POD) designations on your bank accounts. In some states, such as Ohio, you can add Transfer on Death (TOD) designations to your residence and vehicles, which allow these assets to avoid probate.
Once you have your plan set up, consider organizing everything in one place, like a binder. In addition to your estate documents, include a full list of your assets (bank accounts, investment accounts, retirement accounts, pensions, life insurance policies, etc) along with any liabilities (mortgage payments, utility bills, insurance premiums, etc). Having everything in one place makes it easy for you to review your plan from time to time. It also makes it easy to hand over control, if necessary, to your power of attorney upon incapacity, or your executor upon your death.
Don’t delay, get organized now
Everything mentioned above requires careful thought and decision making. We often see clients hesitate and delay creating estate documents because they do not want to make a wrong decision. Keep in mind you can always change your plan. In fact, we encourage clients to review their estate plan on a regular basis for changes in your family, personal wishes, and in legislation. So, do not make the common mistake of not putting your estate plan together because you are unable to make a decision, think you are too young, or don’t think you are wealthy enough. The alternative is allowing the law to dictate how your estate is settled, along with extra time and expense for your heirs in getting your estate settled.
Keep an eye on our Event Tab at mybuckingham.com to register for our upcoming webinar series this fall, “The Only Book You’ll Need for an Organized Estate.” You can also contact our office now to get on our list for this popular event. We will discuss estate planning options and guide you through the “My Estate Organizer”. This organizer goes beyond the normal questions and documents to allow you to note how you would answer many of the questions and decisions that are presented to loved ones after someone passes and are a frequent cause of stress and disagreement among family members. A completed organizer will provide clear information and direction to your loved ones and executors about the steps that should be taken and how best to proceed in taking care of your affairs.
Caring.com 2021 Wills and Estate Planning Study- https://www.caring.com/caregivers/estate-planning/wills-survey#:~:text=In%202017%2C%20almost%20half%20(42,25%25%20in%20just%20three%20years.