What You Need to Know about Estate Planning

Retirement Planning | Taxes & Tax Planning | Estate Planning | Personal & Family Finances | Succession Planning | Wealth Management

 Peter Lazaroff By: Peter Lazaroff

Developing and executing an estate plan is rarely at the top of anyone’s to-do list, but it’s one of the most important pieces of anyone’s financial plan. And by anyone, yes, that includes you!

Regardless of how you feel about the amount of assets you have or whether or not you think estate plans are only for really rich people, the fact is you need one to protect you, your family, and your stuff.

Estate planning is a process designed to help you manage and preserve your assets during your lifetime. Estate plans also conserve and control the distribution of your assets after your death in a way that aligns with your goals and objectives.

Here’s how to tackle this topic and what you need to do to get your own plan in order.

1. What's Included in an Estate Plan?

There are five documents that you should consider putting in place regardless of your age, health, and wealth. These are:

  • A will
  • A living trust
  • A durable power of attorney
  • Advanced medical directives
  • A letter of instruction

For more on each piece of your estate plan, be sure to check out this post and get all the details on the purpose of these documents.

2. When Does it Make Sense to Start?

Everyone should have an estate plan in place regardless of age, level of assets, or life stage. Ask five different estate attorneys when it makes sense to get estate planning documents, though, and you might receive five different opinions.

Here’s my take: the trigger point for getting a full set of estate planning documents is when you get married. Prior to getting married, you should get a durable power of attorney and advance medical directive if you want to have say over medical and financial decisions should you become incapacitated.

How much estate planning you do prior to marriage, regardless of your net worth, is driven by how passionate you are about the way decisions are made when you are unable to make them yourself.

3. What Are the Consequences of Waiting?

If you feel strongly about who should receive your money, property, and possessions in the event of your death, you need to write a will.

Without a will, your wealth and possessions will most likely go to your parents after being processed in probate. There’s nothing inherently wrong with that, but it might not be what you want — and you may not want to make your surviving family members deal with the probate court process regardless of where your assets go after you pass.

The court system can be a costly, time-consuming, and inefficient process for your assets to work through. Not only does it open the door for increased litigation if family or friends disagree on a probate judge’s ruling, but what happens in probate court is also a matter of public record.

If you have minor children, an estate plan is likely going to be critical for your family. A probate court judge will decide guardianship for your kids if you don’t have documents that clearly name who should take custody of your children should something happen to you.

This graphic does a good job of quickly outlining the differences between dealing with probate court — and making sure things happen according to your wishes even if you’re not here.

2018-02-20 Estate Plan Flow Chart V3 (1)

4. What Happens After You Create an Estate Plan?

After executing your estate plan, make sure the executors and trustees you named are aware of your wishes and know where your documents are located. You want to keep your documents in a safe place, of course — but not so safe that they can’t be found when needed!

It’s also helpful to create an estate memo listing all of your financial information. Staying organized helps ease the burden of administering your estate for your loved ones.

Finally, it’s important to review your estate plan every few years to make sure it remains up-to-date with current laws and reflects your wishes as your life changes. With my own clients, we perform a quick review on an annual basis and a more thorough review every five years.

Other trigger points for an estate planning review include major life events like:

  • Changes in your marital status
  • Changes in the marital status of your children or grandchildren
  • Additions to your family through birth, adoption, or marriage
  • The death of a spouse or family member (or if a family member becomes ill dependent on you, or incapacitated)
  • A substantial change in the value of your assets or in your plans for their use
  • Receiving a sizeable inheritance or gift
  • A change in the amount of income you make or need
  • Retirement

Our lives typically get more complex as we age. We grow our families, accumulate property and build our wealth. That makes it crucial to implement estate planning tools early—and review them often.

Estate planning is a little different for everyone. The process may seem overwhelming, but once you execute your estate plan, your peace of mind will be worth it.

There’s no better way to ensure your assets get distributed according to your wishes, making things as easy as possible on your family.

download the estate planning memo worksheet


Related Posts

Peter Lazaroff, Co-Chief Investment Officer, first took an interest in investing when his grandmother gave him a single share of Nike stock for his 13th birthday. Today, nearly 20 years later, his investment insights are highly sought after by local and national media. More »