Blog
  November 18, 2021

Part 3: Protecting What is Yours: Estate Planning Step by Step

We have now reviewed the importance of planning during your life and estate planning before it is too late. If you’ve been putting off your estate planning, taking the initial steps can be daunting—but it's also liberating. Here is a plan to get started today, one step at a time.

Step 1: Deciding who gets what

 A great first step is to ask yourself a few key questions:
 
Who are your heirs and other beneficiaries? How much should each receive? Who should have your vintage bomber jacket, and who gets your grandmother’s pearls?
 
Do not overwhelm yourself with every detail. Instead, start with what leaps to mind as your greatest possessions, goals and challenges. You can always build on this base over time.
 
Who Gets What? A Handy Checklist

  • Estimate your net worth, including assets and debts. For now, just ballpark it.
  • Identify key beneficiaries including heirs, charities, and any other significant relationships.
  • Consider how you would like to divide the bulk of your estate among your beneficiaries.
  • Review prized possessions you would like to pass on to specific people or places—collectibles, heirlooms, keepsakes, and historical memorabilia—and consider who should have them.
  • Identify who you'd like to act as your legal representatives and/or administrators to settle or manage your estate once you pass and ask if they are willing to accept the role.
  • Identify conflicts among beneficiaries such as multiple heirs each hoping to inherit the family cabin.
  • Additionally, identify anyone you might want to explicitly exclude from inheriting anything, such as ex-spouses or estranged family members.

Step 2: Making it Legal

Armed with an idea of what you have and who should inherit it, the next step is to create a legal road map for others to follow.
 
While it is possible to do it on your own, we recommend seeking counsel. Any missing or misguided legal language can sabotage your best intentions. A generic template rarely replaces a reputable estate planning attorney who takes the time to get to know you, translates your wishes into legally binding documents and collaborates with your financial partners to seek the strongest outcomes for you and your beneficiaries. With this relationship, it also will be easier to maintain your estate plans over time.
 
If you die intestate (without a will), it usually takes significantly more time and money to settle even a simple estate, leaving a spouse, parent, or adult child with extra work during a painful time. Plus, your heirs will likely inherit less, as extra settlement costs eat into their inheritance. There is also the potential for costlier infighting among your heirs. 
 
Another frequent question is which legal document(s) will best serve your needs. Here are some common ones:

  • A Will: Nearly everyone should have a will to specify who gets what when you pass. If you have minimal net worth and obvious beneficiaries, a basic will might do it. You typically name one or more executors to move your estate through probate (the legal process for carrying out the terms in your will). Your executors can be family members or professionals such as a bank’s trust services.
  • A Revocable Living Trust (RLT): If your relationships and/or financial affairs are more elaborate, you might want to supplement your will with a revocable living trust (RLT). To settle any assets that remain outside of your trust(s), you should also still have a will. But an RLT lets the bulk of your estate bypass public probate, which usually means a more rapid, private, and cost-effective settlement. It also can resolve complex family dynamics that a will alone cannot address. For example: What if you want your second spouse to be supported financially during their lifetime while keeping the remainder left to children from a first marriage? What if your children aren’t yet ready to manage their inheritance? What if an heir’s spouse is a spendthrift? With an RLT, you can establish successor trusts and trustees to oversee your estate over time, across these and other scenarios. 
  • Other Specialized Trusts: If you are preparing for a business succession, philanthropic endowment, multigenerational legacy or similar higher goals, a specialized trust may help minimize tax ramifications and facilitate optimal outcomes. Various trusts can also be combined with targeted insurance coverage, to help fund critical financial gaps. For example, what if you co-own a business, and your spouse would prefer to be bought out by your partners once you pass? Life insurance may be an affordable way to resolve the challenge.

Step 3: Getting it Together

No matter how carefully you have structured your legal documents, it can be difficult for others to settle your estate as intended if your affairs are in chaos. Once you have formalized your estate plans, it is time to organize the important loose ends—and keep them organized over time.

How Do You Get It Together? A Handy Checklist

  • List your financial assets in detail (investment and bank accounts, retirement plans, etc.).
  • List who should receive specific collectibles, heirlooms, etc. (typically accompanied by broad language in your will or trust, pointing to this adjustable list).
  • List key professionals like your trustees, executors and/or beneficiaries might need to contact (such as your financial advisor, accountant, and estate planning attorney).
  • List other helpful information for your trustees or executors to reduce open questions when you pass. Where will they find your will, trust, and any additional estate planning documents (marriage/divorce certificates, military records, etc.)? Where do you keep your house keys, wallet, security codes, computer logins, etc.? What about a favorite babysitter, pet sitter, or nearby neighbor?
  • Make sure you have funded your RLT with most or all of your major assets, otherwise the trust cannot fulfill its purpose. Your estate planner should be able to assist.
  • With or without an RLT, make sure your home(s), vehicles and other major assets are correctly titled. (Who owns what: you, both of you, your trust(s) or a lending company?)
  • Make sure all beneficiary designations are correct and current in your financial accounts, retirement plans and insurance policies.
  • Go through your home(s) and clear out any decades of accumulated clutter. 
  • Review each of these steps annually to adjust as needed for births, deaths, marriages, divorces, moves, financial changes, career changes, legislative updates, etc.  
  • Last but not least, tighten your security. Your private information needs to remain private to protect against identity theft, legal challenges, and other concerns. And yet it also needs to be relatively accessible to your legal representatives and administrators. A reputable password manager can securely store all your logins. We suggest selecting one that lets you name an emergency contact who can access your account once you have passed. If you already have a password manager in place, now is a great time to set up this important role.

How Can We Help?

It is possible to jump ahead on your way to the estate planning finish line. If you do not say otherwise, your state’s laws typically govern who gets what. You also can let the chips fall where they may on who gets to settle your estate (assuming they can find it).
 
Remember, if you do nothing, you are still doing something. It just may not be the most desirable “something."

Contact us today, and we will help you get started on the estate planning path, connecting you with the relationships and resources you need to speed you on your way