You Really Need an Estate Plan

I’ve yet to meet someone who told me that they would prefer to leave behind a complicated estate when they pass on. I also haven’t heard anyone say that they are hoping the courts figure out where their assets should go instead of making that decision themselves. I’m pretty sure that nobody has expressed an interest in seeing more money than necessary going to the tax man either.

However, I have heard countless people say that they don’t really have any type of estate plans in place and the above scenarios are exactly what will happen to their estate if they pass away tomorrow. An estate plan doesn’t need to be overwhelming or complicated but it does need to get tackled today.

An updated and valid will, power of attorney and a health representative agreement are key components of an estate plan but they are NOT a plan on their own. A will might help to explain your wishes but what about the assets that fall outside of your will such as retirement accounts and insurance plans? Or what about assets that COULD fall outside of your will and save a pile of taxes and fees? Does a trust structure make more sense for you? Would you prefer to see you kids receive their inheritance over time instead of all at once?

A comprehensive estate plan will be a very different thing for different people as each situation is unique. Ideally, it’s a living document that it reviewed every couple of years at least (or more frequently if your situation changes) and adjusted as needed. Changes to your plan could be warranted for any number of reasons:

1) Change in beneficiaries of your insurance and retirement accounts – this could be due to a change in relationship status (yourself or your kids), a beneficiary passing away, your children growing into adulthood, a change in your charitable interests or even tax code changes.

2) Change in tax laws by the government – a certain estate strategy that made sense at the time might no longer be the best option. The government is constantly changing the rules and your estate plan needs to keep up.

3) Change in your own financial or health situation – an estate plan is typically created to ensure that your own retirement needs are met first, and then deals with passing what’s left on in the most cost-efficient manner. A reduced life expectancy might warrant altering plans to focus on the latter while a change in your finances might require an alteration or elimination of certain plans that you’d previously put in place.

Once you’ve put a proper estate plan together don’t forget to properly communicate it to your loved ones. Although people sometimes don’t want to have these discussions, I can guarantee that both sides will feel a lot more comfortable if you do. There is no need to share numbers or values if you’d prefer not to, just lay out the basic structure of the plans. Your children should never find out at the last minute that they are making healthcare decisions or deciding who gets to inherit mom’s prized keepsake.

A Certified Financial Planner (CFP) can do a lot more than simply manage your investments. A good CFP professional will help you both build and update your estate plans on a regular basis to make sure that your affairs are always in order just in case.