4 Steps to be Sure Your Loved Ones are Well Cared For
Planning your estate can be daunting, but it doesn’t have to be.
Many estates are not particularly complex, but the planning is psychologically draining. You need to make decisions about who will receive your legacy, and in what proportions. You need to decide how much, if any, will go to charity, you need to consider how you want your medical care to be handled and by whom. You need to choose a trusted executor for your estate. And then you need to consider the “what ifs.” What if your primary beneficiary predeceases you? What if the kids or grandkids are still minors? What if there are estate taxes?
That’s a lot to deal with. Here are a few simple steps to get you through the process:
Write it down – Take inventory of everything you have, and write it down. Include assets and liabilities on your list and include the approximate value of your assets and amounts owed on debts. You’ll want to include:
- Cash – Including the money under the mattress
- Checking, savings, paypal accounts, etc
- CDs, mutual funds, stocks, bonds
- Brokerage accounts
- IRA and 401K and pension accounts
- Life Insurance and annuities
- Your residence
- Other real estate you own, including time shares
- Farm and livestock
- Business ownership, including corporations, partnerships, patents owned
- Collectibles and precious metals
- Automobiles and other personal property
- Tools and equipment
- Money you are owed
- Bank loans payable
- Mortgages payable
- Personal loans payable
- Credit card debts
While you are at it, make a list of your computer and internet passwords and logins as well.
Once you’ve taken an inventory of everything you have, you also need an inventory of everyone you would like to benefit from your estate. This would include favorite charities, organizations or causes. Be specific here. Will you include the yet-to-be-born? What about adopted, step- or half- children?
With your two lists you have the building blocks of your estate plan. If you are in a committed relationship (married or not), have a frank discussion about how the assets should be allocated. Keep in mind that the estate will still be responsible for paying off estate debts, so you may need to make some assumptions about what assets will remain.
Consult an attorney and accountant – The next step is to consult with expert professionals who know the ins and outs of creating a will or trust. Creating an estate plan is multi-faceted and specific to your situation. Sometimes there are challenges that a professional can help resolve, having seen similar situations before. And a professional can alert you to things you may not have thought of. You can discuss the possibility of estate taxes, and how to minimize them. At the end of the process you’ll have your will or trust written.
Follow through – Once you have your trust or will written, you still have some work to do. For example, if you have a trust you will have to fund the trust by placing the applicable assets in the trust. This is typically a process of changing the ownership of the assets from your individual (or joint) name to the trust name. Complete this important step because an empty trust defeats the purpose of having a trust, and you could lose the trust benefits. You may also need to change beneficiaries on your retirement and other accounts.
Update – Keep your inventory, password and beneficiary lists with your trust or will documents. Every year or so, update your lists to keep them current with changes in your life. If something significant changes, consult with your attorney and update your trust or will as appropriate. In any case it would be wise to refresh your estate plan every five years or so, as laws and tax rules change fairly quickly.
None of the information in this article should be considered legal or tax. Please be sure to an attorney or CPA as applicable.