It’s National Estate Planning Awareness Week, an opportunity for me to goad/guilt you into addressing this tough to embrace, but necessary task.
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Before you say, “that’s just for rich people,” remember that we all have possessions — they may not have huge monetary value, but they are still meaningful. We also have opinions about managing our end-of-life decisions. Most important, without a will, the settlement of your estate, no matter how big or small, will be a headache for your heirs. In other words, everybody needs to do estate planning.
The three core documents are: a will, a health care proxy, and a power of attorney. These are living, breathing documents that can be updated and amended as the years progress. As such, prioritize getting something done over making it perfect.
Will
A document that ensures that assets are passed to designated beneficiaries, in accordance with your wishes. In the drafting process, you name an executor, the person or institution that oversees the distribution of your assets. There is nothing inherently difficult about serving as an executor, BUT it does take time, patience and the ability to organize myriad administrative tasks. If you have minor children, you will also name a guardian.
Healthcare proxy
Appointment of someone to make healthcare decisions on your behalf if you lose the ability to do so.
Power of attorney
Appointment of someone to act as your agent in a variety of circumstances, like withdrawing money from a bank, responding to a tax inquiry, or making a trade.
Letter of instruction
This covers certain things that are outside the will, like the disposition of your remains and your desired funeral arrangements, which can be important if you are choosing something that is contrary to your family’s tradition.
While I am partial to hiring a qualified estate attorney to assist you in drafting these important documents, if the choice is doing nothing or going online to create them, search away. Also note that many companies now offer estate planning services as a corporate benefit.
After serving as executor on a few estates, here are some lessons that I have learned that can make the process smoother:
Provide a list of contact information to the executor
Include names, current addresses and Social Security numbers of all people named in the estate documents, as well as the contact information for the estate attorney and CPA who will be handling the estate.
Communicate where documents and user names/passwords are
Although this sounds like a terrible idea for security purposes, your heirs need to have an itemized list of accounts (with a contact name, phone number and email address), insurance policies (private and employer), a list of automatic pay accounts with information for each payee, housing, land and cemetery deeds, mortgage accounts, vehicle title, partnership and corporate operating agreements, previous three year’s tax returns, marriage license, divorce papers, military discharge information
Utilize transfer on death accounts
Many financial institutions offer the ability to designate a beneficiary of non-retirement bank and investment accounts, which allows ownership of the account to be transferred to the designated beneficiary upon death and generally avoids probate.
Weigh the value of a trust
A trust comes in two forms, revocable (changeable) or irrevocable (not changeable). Trust assets avoid probate and can provide a more precise way in which to transfer assets. But, in some cases a trust can overly complicate the process and add to the cost of the estate plan.
Finally, as hard as it may be to talk to your loved ones about this emotional topic, have these conversations while you still are able to do so.
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Are you better off today than four years ago?
Jill Schlesinger, CFP, is a CBS News business analyst. A former options trader and CIO of an investment advisory firm, she welcomes comments and questions at askjill@jillonmoney.com. Check her website at www.jillonmoney.com.
