Estate planning is one of those subjects we would all rather avoid. The obvious reason being that most people aren’t exactly thrilled about preparing for their own death. Worse, it seems like some kind of self-fulfilling prophecy wherein researching it kills us of boredom. Well, we’ve decided to do you a solid and put together a list that gets you well on your way to boss-level life preparation.
So What’s The Big Deal?
The importance of a bulletproof estate plan is not always self-evident. This is particularly true if you don’t consider yourself especially wealthy, or if you’re confident your family will navigate the process in a fairway. In reality, having a plan in place is extremely important for just about every adult. For example, let’s say you’re married with children. If you and your spouse end up in a fatal car accident, as happens to about 1 million people per year worldwide, who is going to choose your children’s guardian if you haven’t? Is a judge you’ve never met more prepared to make this decision than you are?
Shouldn’t An Attorney Handle This?
Yes, for much of your estate planning you will need to get the help of an attorney. If you can, it’s a good idea to find an estate planning law firm that will walk you through each step for convenience and a reduced likelihood of error. There are a lot of great options out there that offer this service.
1. Write a Medical Directive
If you’re over 18, you need to designate a medical decision-maker. It’s as simple as that. If you cannot speak for yourself, you need a trusted loved one to make medical decisions for you, and they need to know what decisions to make. A power of attorney for healthcare and advance directives ensure your wishes are considered, first, and by the person you trust to make those decisions. Don’t plan that skydiving outing until these are done! Medical directives are a must.
2. Assign a Financial Power of Attorney
Let’s say the skydiving trip doesn’t go so well and someone ends up in a coma. The medical decisions are taken care of, but what if important financial decisions need to be made while the victim is incapacitated? It is imperative that a trusted agent is named in the event of a tragedy. People have ended up in extremely difficult situations due to lack of planning in this respect.
3. Execute a Last Will
When we pass, our assets are transferred to family members according to the default rules in our area. As mentioned earlier, the guardianship of children is handled in the same unsettling manner. A will can ensure that loved ones aren’t left in a position that is more difficult than necessary after you pass. Family members will still likely need to deal with probate court, which can be a long and stressful process. In order to avoid probate, continue reading.
4. Consider a Living Trust
Creating a living trust is more expensive and time consuming than a will. It also requires annoying, regular maintenance. The upside is that your beneficiaries get to avoid probate court in the event of your death if this is done correctly. If you are a high net-worth individual or a business owner this can save a lot of time, money, and stress for your loved ones. You’ll still want a will as a backup to name a personal representative/executor among other things. Often times the trust successor and will personal representative/executor are the same person.
5. Don’t Treat Children Like Adults
A sixteen-year-old racked with the grief of losing their parent probably shouldn’t be handed hundreds of thousands of dollars. Not only would this enable the child to make decisions that can be damaging to their financial future, but it also is not uncommon for financial windfalls to lead to serious health damage as well. By naming an adult to manage these assets until the child comes of age, the likelihood of them mismanaging the assets drops dramatically.
6. Name a Beneficiary to Avoid Delays
It’s an unpleasant fact that deaths are expensive. By naming a beneficiary on bank accounts, retirement plans, and many investments these funds can skip the probate process altogether. This can keep your family from suffering undue burden while they’re already grieving.
7. Dad Was Right About Life Insurance
We’ve all received an ear beating about the importance of life insurance at some point in our lives. While this experience is typically unpleasant, it turns out it was actually for good reason. Life insurance can cover estate taxes, major debts, and even replace your income for your spouse in the event of your death. If you don’t already have it, stop putting it off.
8. Do Your Estate Tax Homework if You’re Rich
I’m sure we can all agree that someone with an $11.4 million net worth is rich right? Well, if your estate is worth that or more, Uncle Sam wants a slice. There may or may not be options available to you that ease the burden here, so do some reading or talk to an attorney if you fit the bill.
Plan your financial future now with Acorns. They can help you invest, save and spend responsibly. Set aside the leftover change from everyday purchases by turning on automatic Round-Ups. Get ready for later in life using Acorns Later, the easiest way to save for retirement.
9. Put Money Aside for Funeral Costs
If you have the ability to put some cash aside, your family will thank you for it. Money can be tagged as “Payable on Death” at your bank, specifically for funeral expenses. As an added bonus, you never know when life might throw you a curveball that leaves you glad you had something tucked away. A separate, dedicated emergency fund might be ideal, but we’re not all eligible for estate taxes.
10. Write Your Last Wishes
Last wishes can range from eccentric to pragmatic. Often, last wishes consist of organ donorship, burial instructions, cremation instructions, etc. However, some last wishes carry a bit less utility. Take Sandra West, for example, an oil heiress who was buried in her blue Ferrari with “the seat slanted comfortably.” Does it get any more classy?
11. Don’t Neglect the Business
If you own a business, it’s likely that people depend on your decision making for their well-being. Some business owners get too caught up with this responsibility in life to consider it in the frame of their passing. If people count on you, you have a responsibility to name a competent successor or at least define a buyout agreement.
12. Get a Filing Cabinet (Seriously)
This process has a talent for generating important paperwork. Your personal representative/executor/successor will need access to all of that paperwork to do their job properly. Score a filing cabinet, they’ll be glad you did.
Brooke Brestel and Sara Bucar are the founding partners at Brestel Bucar, Ltd., a probate and elder law firm in Denver, Colorado.
