When and How Do I Need to Start Estate Planning?

As with the simple answers I penned about whether or not you need long-term care insurance, in which the answer was “Yes”, the simplest answer to the question above is “Now”.  I seem to enjoy finding the simplest answers to what are often complex questions!

Many individuals have in their back of their minds a certain time of their lives when they think they should begin their estate planning.  Unfortunately, it is also a process that people will put off almost until it is too late:  I know of a situation where a family and attorney were trying to get a will signed and certified while the individual was in the last 24 hours of their life!  Other situations have arisen in the case of accidents or something like an aneurysm that led to an unexpected death, where the plans were either incomplete or non-existent.  And the reality is, we never know when.

Do I Need a Will?

Probably.  Dying without a will sets up the distribution of your estate to be determined by the courts that may or may not be what you wanted, and it will also be expensive.   I am not an attorney, and therefore cannot give legal advice, but strongly recommend that you meet with an attorney to discuss your will and other pertinent documents that will greatly assist your family in the event of your death and/or incapacity.  When should you do this?  When you have assets that would need to be managed at your death, and/or when you have a family, and especially when you have children, identifying potential guardians, etc., should they be needed.  Don’t worry about having it all figured out before you consult an attorney.  A good attorney will help lead you through the process and figure out the answers with you.

Name Your Beneficiaries:

Almost 100% of the time, if you are an investor with The Advisors Group, you have already begun the estate planning process:  Your beneficiaries are clearly identified, both primary and contingent, with their associated contact numbers, dates of birth and social security numbers.  This is a requirement for all IRA-types of accounts, and for other accounts, we strongly encourage you to identify beneficiaries using the “Transfer on Death” procedures.  What all of this means is that in case of your death, whether anticipated or not, your assets will transfer directly to the heirs that you have named with a simple death certificate and some paperwork filed with the custodian- Charles Schwab in our case.  Naming individual beneficiaries not your “estate”, and not minors- is always a recommended first step in setting up new investment accounts. You always have the option to change/update your beneficiaries until your death.  After your consultation with an attorney, you may need to update your beneficiaries to coincide with your completed estate plan.

How Often Should I Update My Will? 

Again, not an attorney, but a good practice that we recommend is for individuals and couples to review their wills every five years, or when there is a major change: marriage, birth, death, divorce, etc. Minor changes can often be added via a “codicil” to avoid the costs of time and money from drafting a completely new will.

Is There Anything Else I Need Besides My Will?

With the “not an attorney” caveat, as Certified Financial Planner ™ practitioners, we believe that there are three other documents that are at least as important as a will, if not more so:  Durable Powers of Attorney documents and Advanced Directives.  Both of these address issues that may arise while you are still living. The Financial Power of Attorney document enables your agent to pay bills, transfer money, and even file a tax return, all on your behalf, if you are unable to take care of these issues for a period of time.

The separate Medical Power of Attorney gives authority to a designated individual to make medical decisions for you in a situation where you cannot make the decision yourself.  Think of situations like accidents, strokes, mental incapacity, etc.

Along with these Powers of Attorney are the HIPAA Release and Advanced Directives, which tell your health providers what your wishes are related to catastrophic health issues, and who is empowered to make those decisions for you. An example is when or whether to disconnect life support, or to engage in extraordinary life-saving measures, or not.

All of these documents should be drafted with your attorney when you set up the consultation for your will.

Do I Need to Set Up a Trust?

For most people, no you do not need a trust. But again, this is a legal decision that should also include consultation with your financial and tax advisors as there are many situations where a trust, of which there are many different types, is the right choice for your circumstances, and others where it is a needless complication and expense.

Is There Anything Else I Need to Do?

A final consideration to again discuss with your attorney is what is called a Transfer on Death Deed (in Texas only). This is a provision enacted by the Texas legislature where you can transfer the title of your home, other real estate, vehicles, etc. upon your death directly to your beneficiary or beneficiaries with only the presentation of a death certificate.  Here is the real benefit: it enables you to transfer property without having to probate it first. Probate in Texas is not exceptionally expensive, but it can be a needless hassle when you are least equipped to deal with it, both in terms of your time and dealing with grief at the loss of your loved one.

The information we have provided in response to this question about when and how to do estate planning is not intended to be a comprehensive exposition of all that estate planning entails, but instead to encourage the responsible discussion and exploration of a necessary process.  At some point, we will all die – yet another guarantee- and the planning that you complete beforehand will save your family additional challenges at an extremely difficult time.  It is another way that we can provide for our families and demonstrate our care and concern for them and their well-being.


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