A 10-step guide to estate planning (Part 1)
August 1, 2016
By Martha Sullivan, CPA, CVA/ABV, CM&AA, CEPA
Partner, Succession Planning Practice Leader
Many people dread the thought of doing estate planning because it reminds us of our mortality.
Our time here on earth is limited. There won’t be any need for my worldly possessions. The things that gave me pleasure are now simply memories. My family and friends are out of reach.
The reality is, however, that my passing is a new beginning for my loved ones. When my door closes, a new chapter and phase in their lives begins. My estate plan, in my mind, is my last gift to them to help them launch into this new phase.
The concept of estate planning is to articulate how you want things to be handled when the time comes. While focused largely on financial elements, it also includes management of personal affairs and communicating your wishes to those left behind. Simply stated, the process includes 10 steps:
1. Document What You Own & Owe: Building the inventory of your assets and obligations is the first critical step in estate planning. The listing should include all of the pertinent contact information, including account information, and be updated on a regular basis. If an asset, such as a 401(k) account, has a standalone beneficiary designation associated with it, ensure that the named beneficiaries remain appropriate.
2. Name Your Guardian Angels: Identify those individuals that you wish to empower as fiduciaries over your affairs including guardians of your children, executor of your estate, trustees of accounts and powers of attorney.
3. Protect Your Loved Ones: If you have minor children, outline who should care for them if you and their other parent are not able to do so. If there are loved ones with special needs, you may consider strategies to provide for their care, regardless of their age, which should also be documented. Review your life insurance policies and the related beneficiary designations.
4. Plan for the Unexpected: Consider how you want to be cared for if you were to become incapacitated for either a short time or longer. Document where and who should care for you and what alternatives should be considered. Inventory the health, long-term care and disability policies that you have, including contact information. Execute powers of attorney for health care and financial decisions as well as a living will.
5. Document Your Wishes: Armed with the inventory of assets and obligations, give careful thought to how you want the net assets distributed. Review your beneficiary designations and if they no longer fit into your wishes, update them. Document your wishes in your will.
6. Protect Your Assets: Assemble your team of advisors and share with them all of the information and decisions you’ve made in the prior steps. Work with your accountant and wealth advisor to understand strategies to minimize estate taxes. Talk to your insurance agent to ensure you are adequately protected. Hire an estate attorney to help you draw up all of the appropriate documents.
For some people, this process is indeed straight-forward and relatively simple while for others it can be more complex. Steps 7-10 for business owners will be addressed in the next blog.