Estate Planning. Just the mention of the subject is enough to turn off the brain. Well stick with me for a minute, because we all need it and also because I believe I can quickly show you how over 85% of adults can do a really good job of estate planning in just a couple of hours. And the best part? It’s free!
In my opinion, all most people need to do are these 5 things.
Have a will. Almost half of all adults do not have a will. No way do you want to be in that camp, some court deciding whatever they wish regarding the disposition of your assets and even the guardianship of your children. Creating a will is quite simple these days. The forms are available on-line and are inexpensive or even free. If you want help filling it out there are on-line services that will walk you through it for a small additional fee.
The purpose of a will is to cover children, personal possessions and such but should not cover the disposition of your assets if you can avoid it. I say this because assets covered in a will are subject to probate which can tie up assets for a long time, even a year or more, and in most states it will also consume a bunch of your money in fees. So how do you handle your assets while avoiding delays and fees? That’s what the next two steps are all about.
Own assets jointly, where appropriate. Property held in joint ownership, such as your home (if you’re married) and joint bank or brokerage accounts are essentially immediately available to the surviving party at no cost whatsoever.
Identify a beneficiary on all asset accounts. If it’s a joint account, you’re done. If not, just list a beneficiary. If anything happens, the assets are available immediately on a joint account and in a few days on the rest. If you’re unsure of how to do this, just call the company holding the account and they should be able to quickly walk you through it. You should also know that, as a general matter, the ownership of any and all tax-free/tax-deferred accounts automatically goes to the surviving spouse unless you designate otherwise, and without any taxes having to be paid at that time.
In the case of minor children, the wills of both parents should specify who will be the guardian and who will be responsible for managing any and all assets left to them on their behalf if both parents die. Also, there may be instances where you cannot find a good way to cover your wishes by naming beneficiaries, such as in the case of multiple adult children. In those instances you may have no choice but to include the assets in question in your will and have them subject to the probate process.
Have a living will and healthcare power of attorney. These are just some straightforward forms you need to fill in to insure that your wishes are carried out regarding medical treatment, should you be unable to speak for yourself. In some states both forms are even combined into one. Your healthcare provider should have these forms and can usually help you fill them in.
Organize your documents. Put all of your financial and legal documents in one place and keep them up-to-date. At the end of this blog is a complete list of what to include.
If you have millions in assets, own a business, or have otherwise non-standard assets, then you’re likely not to be in the 85% who don’t need help setting up their estate plan. In that case you need to look into the possibility of setting up one or more trusts and getting legal help to set things up correctly.
Here is a list of the documents you need to gather together and maintain. Be sure that the executor named in your will knows where the documents are being kept.
- Asset accounts– The most recent copies of all bank, brokerage, and retirement account statements. If they are paperless, print out and file copies of your account statements semi-annually and identify where the latest statements can be found online.
- Debts– Copies of any mortgages, notes, credit cards, or other agreements and obligations and the current balances due on all outstanding debts and loans; also include the payoff documentation on all closed loans. If they are paperless, print out and file copies of your account statements semi-annually and identify where the latest statements can be found online.
- Family legal documents– The originals or copies of all other family legal documents, for example, birth and death certificates, marriage certificates, divorce settlements, passports, etc.
- Estate Planning– Copies of all wills, trusts, living wills, health care powers of attorney, and general powers of attorney.
- Insurance– Copies of all insurance policies.
- Taxes– Copies of tax returns for at least the last five years, statements, receipts for deductions, proof of payments, etc.
- Titled Property– Originals or copies of all deeds to homes or other real property, titles to motor vehicles, and any ownership documents to other assets with titles.
- Social Security and Medicare/Medicaid- Cards, benefit printouts, etc.
- Business legal records– The books and minutes for any corporations, LLCs, or partnerships.
- Other– All documentation regarding any other assets or liabilities, location of and access to lockboxes or storage units, lists of people to be notified, and anything not covered above, which you feel is important and which would be necessary for your executor and/or heirs to review and use when you pass away.