By Greg Hart, CFP®
When something seems overly complicated, it’s all too easy to put it off, promising yourself that you will take care of it in the future. Nowhere is this more true than in estate planning. Most Americans agree that it’s important to have their affairs in order, with 52% saying it’s irresponsible not to have a plan. But only 18% of those age 55 and older have taken action and prepared the “contingency trifecta” of drafting a will, a healthcare directive, and a durable power of attorney. (1)
The discrepancy between the statistics likely exists because 1) it’s no fun thinking about our own disability or death, 2) we believe it’s too costly to get these documents in place, or 3) because we think we don’t have enough money to worry about estate planning. Regardless of how much or how little you have to your name, if you don’t create a plan, you are taking a huge risk when it comes to caring for your family and your assets.
We believe your estate plan does not need to be complicated or stressful, and the peace of mind it provides is worth it. With that in mind, here are 5 basic steps to get you started on your estate plan.
1. Create A Will
Everyone needs a will to spell out their wishes and name someone to handle their financial affairs. Each person’s will is unique and will include different requests, but a few standard essentials to include are:
- Assets: In your will, you’ll define which heirs will get what assets. This not only includes the percentages of your savings, investment accounts, or other valuables and sentimental items, but business ownership, real estate, and digital assets as well.
- Property: Beyond assets, you may also have homes, land, or business buildings that you may want to leave to specific people.
- Guardianship: If you’re a parent of a young child, this can be one of the most important parts of your will. Be sure to name a legal guardian for your minor children, so if you pass away before they are legal adults, they will be cared for by the person of your choice without legal drama.
Once your will is drafted, it’s critical to keep it up to date. Review it at least every few years and whenever you experience a major life event, such as marriage, divorce, death, or birth.
2. Appoint Trustworthy People
The next decision to make is to choose who you’d like to take care of certain responsibilities in the event of your disability or death. Some people opt to have one person take on the various roles, while others appoint multiple people to carry out the different tasks. Some states have stipulations on who can serve in these roles, but they are often family members. (2) The primary roles are:
- Executor: This is the person who is legally responsible for carrying out the directions of your will. They will ensure that your assets are distributed to your heirs and that your valuable items are given to the people you intended.
- Primary agent: A durable power of attorney is a document that gives someone the legal ability to take care of your financial affairs if you are unable to do so while you are still living. This person should be someone who is financially savvy and organized. They will handle any bills or income received and will follow your instructions laid out in the durable power of attorney.
- Healthcare proxy: Similar to a primary agent’s job to make financial decisions on your behalf, a healthcare proxy is someone you appoint to make medical decisions for you if you are unable to do so. These wishes can be laid out ahead of time in a document called a medical power of attorney or healthcare directive.
Start a conversation with the people you trust most to handle your affairs and let them know that you are including them in these official documents.
3. Consider Trust Funds
Depending on what you want to accomplish with your assets and the specific needs of your situation, you may want to consider setting up a trust fund for your heirs, especially for minor children. Contrary to popular belief, these are not just for the very wealthy. Trusts can be a wise way to ensure that the legacy you’re leaving behind is protected. There also may be tax benefits in choosing to use a trust, depending on the amount of assets left in trust.
You may consider setting up a living trust, also known as a revocable trust, which is created while you are still living and, as the name implies, is revocable while you’re alive. In the event of your death, the trust is distributed to designated beneficiaries, similar to that of a will, except that the process can be quicker and private; or, you could choose to have the assets remain in trust for heirs during their lifetime or until they reach certain ages. If you’d like to contribute some of your assets to a cause that is close to your heart, you may consider a Charitable Trust. This not only aids a charity but also give you immediate tax breaks. (3)
Talk with an estate attorney to help you determine which option is best for your situation.
4. Organize All Important Documents
It’s important to keep all your estate planning documents safe and organized so they are accessible when they’re needed. Using one central location, gather all important documents, including:
- Tax returns from the past seven years
- Insurance policies
- 401(k) statements
- Bank account information
- Mortgage paperwork
- Loan documents
- Brokerage statements
- Social Security, health insurance, and Medicare cards
- Contact information for your financial advisor, doctors, attorney, and accountant
Make sure your spouse or closest family member knows where to find this information.
5. Rely On Experts
Planning an estate involves many intricate details and time-consuming tasks, but don’t let that prevent you from getting your affairs in order when a professional is available to help. While it is possible to create wills online nowadays, there are often complex nuances to estate laws, and regulations differ from state to state.
An estate attorney can help you sort through some of the different options to help you create the best plan for you and your loved ones. You should also consider meeting with your financial advisor, as he or she is heavily involved in your financial life and can work with you to make a plan for your assets and connect you with a reputable estate attorney.
Ready To Get Started?
It is never too early to start putting a plan in place for your estate. Many families feel more secure knowing they’ve taken the steps necessary to get a plan in place. At Haddon Wealth Management, we provide customized financial solutions to meet your needs, so whether you are starting from square one or think it’s time to update your will or other documents, we’d be happy to review your current situation and then make recommendations to help you with your estate planning. Connect with us today by calling (856) 888-1744 or contact us online to schedule a complimentary get-acquainted meeting.
Gregory M. Hart, CFP® is the founder and managing director of Haddon Wealth Management, LLC, a registered investment advisory firm that provides comprehensive wealth management (in-depth financial planning and sophisticated investment management) for clients who value a relationship-driven approach that delivers customized solutions. Based in Haddonfield, New Jersey, Greg works with clients throughout the Delaware Valley, as well as nationwide. To learn more, connect with Greg on LinkedIn, visit our website at www.haddonwealthmgt.com, or call (856) 888-1744 to begin a discussion.