As a financial advisor who has helped numerous families with estate planning, I have seen the effects of good planning—and what can happen when a family isn’t prepared. Most of us understand that having an estate plan is crucial, yet only around half of Americans have done any estate planning, (1) which means half the population is taking a huge risk when it comes to caring for their families and assets.
Too often, it’s usually because people assume they don’t have enough wealth to need an estate plan. Or, they assume they’re too young to need to plan, or that because they don’t have a spouse or children, it’s not necessary. But estate planning is important for most situations, if only to make it easier for family members and loved ones. If you don’t create a plan, you are leaving your loved ones with legal headaches. Your family will be left to guess how to handle end of life care and how to divide the assets, and probate and taxes may diminish the assets you’ve left behind.
While it may seem daunting, the process of thinking through your estate plan does not need to be complicated or stressful, and the ensuing benefits are invaluable. Here, we share five critical steps you can start putting into place today.
1. Create a Will
Everyone needs a will to spell out their wishes and name someone to handle their financial affairs. Each person’s will is unique and features different requests, but a few standard essentials to include are:
Guardianship. If you’re a parent of a young child, this can be one of the most important parts of your will. Here, you can name a legal guardian for your minor children should you pass away before they are legal adults.
Assets. In your will, you’ll define which heir gets what, including percentages of your savings, specific accounts, certain properties, cars, or other valuables and sentimental items.
Real Property. Beyond assets, you may also have homes and buildings that you want to leave to specific people.
Once your will is drafted, you’ll want to keep it up-to-date. Review it at least every two to three years and whenever there is a major life event, such as a marriage, divorce, death, or birth.
2. Choose an Executor, Durable and Healthcare Powers of Attorney
It’s important to spend time considering who you’ll select as your executor, durable power of attorney, and healthcare power of attorney. In some cases, one person may serve in all three positions, or you may assign each task to a different person, depending on their strengths or your preferences.
Being an executor is a serious responsibility with a lot of obligations and big decisions to make. While you want to choose someone close to you and who you trust, you also want to make sure the person is up to the task. With so many financial responsibilities, your durable power of attorney should be someone who is organized, financially savvy, and willing to take on such a critical task.
Your medical power of attorney should be someone who you trust to make important medical decisions if you’re unable to do so. Consider speaking with your closest family on who would be best suited to serve in these roles.
3. Update Your Beneficiaries
There are some limitations to wills, namely that the beneficiary designations on your financial accounts, insurance policies, and other statements will take precedence over your will. Make sure the beneficiary designations on those documents are updated and match your will.
As a rule of thumb, review and update your beneficiaries every time you review your will or a major life event occurs. You should also choose a contingent beneficiary just in case your primary beneficiary dies and you forget to update your beneficiaries.
4. Organize All Important Documents
It’s important to keep all of your estate planning documents safe and accessible when they’re needed. In one central location, organize all important documents, including:
Tax returns from the past seven years
Bank account information
Social Security, health insurance, and Medicare cards
Contact information for your financial advisor, doctors, lawyer, and accountant
Make sure your spouse or closest family member knows where to find this information.
5. Rely on Experts
Planning an estate involves many intricate details and time-consuming tasks, but don’t let that prevent you from getting your affairs in order when a professional is available to help. While it is possible to create wills online nowadays, there are often complex nuances to estate laws, and regulations differ from state to state.
An estate lawyer can help you sort through some of the different options to help you create the best plan for you and your loved ones. You should also consider meeting with your advisor, as he or she is heavily involved in your financial life and can work with you to make a plan for your assets.
No one likes to think about the end of their life, but if you want to set your loved ones up for success, you need to have a plan in place. If all of this seems overwhelming to you, you’re not alone. That’s why so many people avoid estate planning and leave their families with a mess. But it doesn’t have to be that way. We are here to help.
At Key Wealth Partners, LLC, we want to help you define, gather and preserve what is yours. We can help you with every aspect of your estate planning, from leaving an inheritance to defining the legacy you wish to leave. Give me a call at (717) 283-4186 or email me at email@example.com to schedule time for us to speak.
David Niggel, CFP®, ChFC®, AIF® is the founder and president of Key Wealth Partners, LLC, an independent wealth management firm serving individuals, families, and business owners. Along with over a decade of financial services experience, he has advanced knowledge and training in providing holistic financial planning with fiduciary and ethical care, holding the CERTIFIED FINANCIAL PLANNER™, Chartered Financial Consultant®, and Accredited Investment Fiduciary® certifications. With hands-on entrepreneurial experience, he has the unique ability to help clients meet both their individual and business goals. Based in Lancaster, he serves clients through the York, Harrisburg, Hershey, and Central, Pennsylvania areas. Learn more by visiting www.keywealthpartners.com or connecting with David on LinkedIn.