Key Takeaways
Nobody enjoys planning for their end of life, but you owe it to your heirs and beneficiaries to make sure your estate and wishes are well documented. Way too many Americans don’t.
Make sure to review your estate documents every five to seven years or whenever life circumstances change, or changes in the tax law occur.
Birth of a child, divorce, job loss, inheritance, death of a family member, and disability are all reasons to review your estate docs.
We are now about 2 months into the New Year – who is still sticking to their New Year’s Resolutions? I know it isn't a very enjoyable task or fun conversation to have, but updating your estate planning documents is one of the best things you can do for your heirs. Afterall, estate planning isn’t really for you, it is for your loved ones. Chances are it’s been a while since you last reviewed your will, your beneficiaries and powers of attorney (POA) and your life circumstances may have changed.
If you pass away suddenly or become seriously disabled without an up to date estate plan, consider the following:
You don’t want the courts to decide what happens to your money.
You don’t want to have a medical emergency and have your POA be out of date.
You don’t want to create family friction over money or legal guardianship of your minor children.
I bring this up because even after COVID upended our lives, two-thirds of Americans still don’t have estate plans according to a Caring.com survey. That means in the event of death or disability, they’re leaving what happens to them (and their assets) up to others, including the state.
The biggest reason why: They just haven’t gotten around to it, according to 40% of survey respondents. Meanwhile, 33% said they don’t have enough assets to pass on to their loved ones, 13% said the estate-planning process is too costly and 12% said they do not know how to get a will.
I get it. No one likes thinking about their own demise, let alone planning for it and putting it in writing. But think about the consequences of not having your estate planning documents in place and up to date:
Family dynamics and relationships change. You want to make sure that you still have the right people named to fulfill important roles such as financial power of attorney, healthcare power of attorney, executor of your will, even guardianship of your minor children (see definitions below). If you’ve had a falling out with someone in your family, do you really want that person handling your affairs if something unfortunate were to happen to you?
It’s important to have successors in place for the important roles above. That way, if your primary person passes, you don’t want to be scrambling to find a replacement and pressuring your attorney to update your documents last minute.
The biggest impact could be guardianship designations for minor children, especially for younger clients. It’s very important to have someone named that you trust explicitly to become the legal guardian for your children if something tragic happened to you and your spouse. Without that designation, the courts will decide who becomes the legal guardian of your children and it could end up being a parent or sibling that you don’t get along with, or who isn’t capable of handling such a huge responsibility.
Do it yourself or hire an attorney? As mentioned earlier, many successful people drag their feet on estate planning because they think hiring an estate attorney is too expensive. It can be tempting to use low-cost online resources such as Legal Zoom, FreeWill, Nolo.com, etc. to draft your own will and other estate planning documents. If you’re young, tech-savvy, and don’t have a complicated situation yet, the online route can be a good starting place. But you’ll be on your own online. Eventually, you will have questions the software can’t answer and it’s easy to feel overwhelmed. An estate attorney – and his or her team -- knows what questions to ask and can navigate difficult conversations and complicated forms. Most people find this peace of mind is worth the extra money.
Here are some of the most important documents and designations you want to have up to date and easy to locate:
Will - allows a person to specify how their property and assets will be distributed after their death
Living Will - allows an individual to express their wishes regarding end-of-life medical treatment in case they become incapacitated and unable to communicate their wishes.
Durable (Financial) Power of Attorney - allows an individual to designate another person, known as the agent or attorney-in-fact, to manage their financial affairs if they become incapacitated and unable to manage their finances themselves.
Healthcare Power of Attorney - allows an individual to designate another person, known as the agent or healthcare proxy, to make medical decisions on their behalf in case they become unable to make those decisions themselves.
Guardianship designation (if you have kids under age 18) - Guardianship of a minor: allows parents or legal guardians to appoint someone to take care of their minor child in case they become incapacitated or pass away.
Beneficiaries for your IRAs, retirement accounts, insurance policies, etc. - a person or entity named in an IRA, Retirement Plan, or Insurance Policy who will receive the assets held in the account upon the account owner's death.
Executor of your estate - a person or entity designated to oversee the distribution of a deceased person's assets and property according to the instructions outlined in their will.
The rule of thumb is to review these documents every five to seven years or whenever life circumstances change such as the birth of a child, divorce, job loss, inheritance, death of a family member, disability or major falling out with a sibling or close relative. We’ve had clients come to us after spending three to five years trying to settle their parents' estate without the executor or will clearly defined and they’re overwhelmed. It can be a nightmare.
At Novi, we review estate planning documents with our clients when they come on board and periodically, especially when their life circumstance change, or tax law changes in a way that affects the client. We become a sounding board with experience and knowledge to help you understand the personal and legal complexities associated with these documents. If needed, we can refer you to an attorney that would be appropriate for your personal circumstances. By having a comprehensive Advisor looped into your circle of planning, we are able to keep tabs on both internal and external factors that would prompt a review of your estate plan.
Conclusion If you or a family member has questions or concerns about your estate, please reach out any time. We’re happy to assist.
BRENDEN LEESE, CFP® is an Associate Wealth Advisor at Novi Wealth Partners