Approaching the topic of estate plans can often be an uncomfortable discussion for many. But having an estate plan, being aware of what it says, and making sure that it reflects your values and wishes is one of the greatest gifts you can give your survivors.
Responses to inquiries about estate planning reflect our very human desire to avoid talking about dying. These are some common responses when people are asked about their estate plans:
- We don’t have one. We know we should, but we just haven’t gotten around to it.
- We did wills a long time ago when our kids were young, but now those kids have kids of their own.
- We have an estate plan and/or trusts but we are not sure what it says or really means.
The role of financial advisors is to help clients start, continue or finish this challenging conversation. Sometimes the remaining decisions are easy. Other times couples disagree and there can be sticking points that paralyze their decisions. Sometimes there isn’t an obvious person to fill the roles involved like executor, guardian for kids, or a power of attorney. (For related reading, see: Estate Planning Basics.)
While we are not attorneys and can’t and don’t give legal advice, we can help prepare and provide clarity for your first visit with an attorney.
How Assets Are Distributed
If you don't have an estate plan the state creates one for you. At death, virtually all assets are distributed in the following ways:
- Ownership - If your property is owned by joint tenants with survivorship, the asset goes to the remaining surviving owners. So if you own your house with your spouse, your spouse gets it.
- Beneficiaries - Generally you name beneficiaries on retirement plans, life insurance and health savings accounts.
- By will or state law - Anything that isn’t distributed by ownership or beneficiary. Some people believe they will not need a will because their spouse gets everything by ownership or beneficiary. While that may be true, what happens if you both die together?
A second marriage, a family cabin, a child with special needs, a partial interest in a piece of real estate (a family farm etc.) are examples of how the distribution of assets can become complicated.
An Estate Plan Reflects What Is Important to You
Your estate plan can serve as a reflection of what is important in your life. These can be hard conversations but are important. (For more, see: 3 Secrets You Didn’t Know About Estate Planning.)
- If you are a charitable giver during life, do you want to continue that legacy at death?
- How much is enough or too much for your children or other family members?
- How do you determine what is fair? Oftentimes what is “fair” isn’t always “equal.”
If Incapacitated, Who Will Make Decisions on Your Behalf?
Estate planning also covers the questions about whom and how decisions are made if you are incapacitated.
- Who will make financial decisions? Power of attorney or living trusts?
- Who will make health decisions? Healthcare directives are vital documents. Who has access to your medical records with current HIPPA regulations?
An Estate Plan Evolves As Your Life Changes
Estate planning is not something you do once and then you’re done. Your estate plan should change as your life changes. Below are some additional considerations:
- If you have grandchildren, do you want to give money directly to them?
- At what ages do you want any adult children to receive an inheritance? You may decide that you want money in a trust for your adult children longer than your initial estate plans indicated, or you may look at your adult children and say they shouldn’t have to wait or deal with any trusts if you died now.
- You might not have had a charitable intent earlier in life but do now, or your charitable intent might have changed.
I have lost track of how many different wills I’ve done in my life. This reflects the fact that I don’t have children, was in a partner relationship for 34 years before I received the right to marry, have real estate in another state, have charitable desires and that I’m a financial planner who believes in planning.
One of the greatest gifts you can give your survivors is to have your estate in order. Having to dig through a deceased loved ones financial life to determine what they have and don’t have is an extra burden that can be avoided. (For more, see: Estate Planning Checkup: When to Update your Estate Plan.)
Disclosure: Investment Advisory services offered through Birchwood Financial Partners, Inc. an SEC Registered Investment Advisor. Birchwood Financial Partners, Inc. does not provide tax or legal advice. Please consult a qualified professional for assistance with any tax or legal issues such as wills and trusts. The information related to estate planning in this letter is general in nature and does not constitute tax or legal advice or a solicitation for any such service. All written content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Opinions expressed herein are solely those of Birchwood Financial Partners, Inc., and our editorial staff. Material presented is believed to be from reliable sources; however we make no representations as to its accuracy or completeness. All information and ideas should be discussed in detail with your individual adviser or qualified professional before making any financial decisions. We are not affiliated with or endorsed by the Social Security Administration or any government agency. Investopedia may include additional links. The inclusion of any link is not an endorsement of any products or services by Birchwood Financial Partners. All links have been provided only as a convenience.