Unless you’ve done the planning, assets may not be distributed according to your wishes and loved ones may not be taken care of after your death. These are just two reasons to make sure you have an estate plan, according to the recent article titled “Estate Planning 101: 10 Tips for Success” from the Maryland Reporter.
There are several other key tips for estate planning for you to consider, here are 10 of them:
Gather Asset Information. This should include all your property, real estate, liquid assets, investments and personal possessions, and not just assets you think your Will will control, gather it all. With this list, consider what you would like to happen to each item after your death. If you have many assets, this process will take longer—consider this a good thing. Don’t neglect digital assets. The goal of a careful detailed list is to enable your fiduciaries to quickly identify, gather and ultimately distribute your assets.
One more key thing, put this list in a place that’s accessible. Don’t assume technology will make that possible as an era of passwords and high security, although great in most contexts, makes accessibility difficult for your family. Instead, consider sharing information with them in advance so they are prepared to deal with this.
Meet with an estate planning attorney to create wills and/or trusts. These documents dictate how your assets are distributed after your death. Without them, the laws of your state may be used to distribute assets. You also want to pick the person whose job it is to wind-up your affairs, and these documents name the person responsible for carrying out your instructions. If you already have estate planning documents, you should have them reviewed from time to time as clients sometimes out grow their estate plans, or have better options on how to accomplish their goals.
Anecdotally, I participate in estate-related study groups, message boards and other groups in which lawyers workshop estate problem. The hardest cases to figure out and the hardest cases to get a satisfactory conclusion for are very typically cases where no estate planning was done.
If you don’t have an estate plan and want ideas on how to start the process, see this article: https://galligan-law.com/how-to-begin-the-estate-planning-process/
Guardians for minors, the person who will raise your minor children if you should pass. You can nominate who will serve as their guardians.
Beneficiaries named? Now, very frequently people tell me in consultations that they don’t need an estate plan, because they have beneficiaries named on all of their assets. That is virtually never true, however, for this list’s purposes, I say it is worth reviewing which assets should name beneficiaries (e.g. life insurance or retirement funds) and confirm they match what you want.
One of the difficulties with beneficiary designations is that they are like old estate plans, people set them, and then never change them. I’ve seen ex-spouses left on them, mistakes like naming only one child to receive everything because they will “do the right thing,” not having contingencies if the named person predeceased, and so on. They also write their own rules on contingencies. So, if you leave your IRA to 3 named children, but one of them is deceased, their portion may go to their siblings, or maybe their children, or even possibly your estate. The answer lies in the plan documents, so it is important to consider them in your estate plan.
Also, clients may have excellent wills that address all form of concerns. But, then names one child as beneficiary of their assets. That typically means the will has to be probated (did you have a beneficiary on your house?), but zero cash to fund it. That is not an enviable position for the executor. Plus, if the will establishes trusts, plans for minors or incapacitated beneficiaries, or any of the many other problems you can proactively plan for, but the asset goes directly to a person instead, all of those protections and solutions were circumvented. So, speak with your estate planning attorney to ensure the beneficiary designations work with your estate plan.
Make your wishes crystal clear. Legal documents are often challenged if they are not prepared by an experienced estate planning attorney or if they are vaguely worded. You want to be sure there are no ambiguities in your will or trust documents. Consider the use of “if, then” statements. For example, “If my husband predeceases me, then I leave my house to my children.” This is especially true in contingencies, which I’ve found people typically haven’t considered.
Trusts may be more important than you think in estate planning. Trusts allow you to take assets out of your probate estate and have these assets managed by a trustee of your choice, who distributes assets directly to beneficiaries. You don’t have to have millions to benefit from a trust. I’ve written extensively about the benefits of trusts, so you can find several articles elsewhere on that topic.
List your debts. This is not as much fun as listing assets, but still important for your executor and heirs. Mortgage payments, car payments, credit cards and personal loans are to be paid first out of estate accounts before funds can be distributed to beneficiaries. Having this information will make your executor’s tasks easier.
Plan for digital assets. If you want your social media accounts to be deleted or emails available to a designated person after you die, you’ll need to start with a list of the accounts, usernames, passwords, whether the platform allows you to designate another person to have access to your accounts and how you want your digital assets handled after death. This plan should be in place in case of incapacity as well.
Plan for Incapacity. All too often, clients only think of estate planning in the context of their passing. That is of course part of it, but sometimes it is even more critical to consider incapacity. What happens with your assets if your health doesn’t permit you to handle your own finances? Who would speak for you? Do you want them to do whatever they want, or do you want to give them direction? This is extremely important as it directly affects your well-being as this person will pay for your daily needs and medical expenses.
Plan for Long Term Care. The Department of Health and Human Services estimates that about 70% of Americans will need some type of long-term care during their lifetimes. Some options are private LTC insurance, government programs and self-funding.
The more planning done in advance, the more likely your loved ones will know what to do if you become incapacitated and know what you wanted when you die.
Resource: Maryland Reporter (Sep. 27, 2022) “Estate Planning 101: 10 Tips for Success”