Estate Planning is for Everyone

By Kris Maksimovich, AIF®, CRPC®, CPFA®, CRC®:

If estate planning conjures up thoughts of rambling estates, stables and riding gear you’re missing the point completely. Estate planning is a tool that enables you to decide how the things you own should be handled after death or incapacitation. Estate planning is for everyone, not just the wealthy.

What are the consequences of putting off estate planning?

Even the rich and famous put off proper estate planning. Well-known people like Abraham Lincoln, Sonny Bono, Pablo Picasso, Howard Hughes, James Brown, John Denver and Amy Winehouse died intestate, or without a valid will. More recently, Aretha Franklin and Prince died without wills or estate plans tying up Franklin’s $80 million estate and Prince’s $200 million estate while both landed in probate.

Sadly, many people put off creating an estate plan or think they don’t have enough assets to bother with it. This can create a headache for heirs who must wait to receive their inheritance after probate. It can also negatively affect you should you become incapacitated. What’s worse, the inheritance can get tied up by court battles as heirs vie for a share for years to come.

What do estate plans cover?

At a minimum, an estate plan allows you to select someone you trust to make decisions on your behalf after your death or should you become incapacitated. This enables your wishes to be carried out quickly and smoothly and helps you determine the degree to which probate can be avoided. An estate plan also lets you determine what happens to your property, the well-being of your family, the guardianship of minor children and how to minimize or eliminate taxes. Estate plan documents can also cover the extent of medical treatment you desire.

Estate plans cover an array of your financial assets and concerns including:

• Care of minors
• Care of pets
• Healthcare directive
• Beneficiaries, executor, designee or trustee
• Your home and other real estate
• Automobiles, boats or other vehicles
• Investment accounts, bank accounts, 401(k) or IRA
• Artwork
• Jewelry
• Intellectual assets
• Digital assets
• Businesses owned

What do I need for an estate plan?

You’ll likely need help determining what topics should be included as part of your estate planning process.  Topics to discuss with your financial advisor include:

• Financial Power of Attorney – A financial power of attorney (POA) authorizes a trusted principal to act on your behalf, either effective immediately or based upon a future event like incapacitation.
• Healthcare Power of Attorney – A healthcare power of attorney authorizes a trusted designee to make decisions on your health care should you become mentally or physically unable to do so.
• Living Will/Advanced Directive – A living will and advanced directive can express your specific desires should you become critically injured, terminally ill or unable to express your wishes. It can spell out the types of life-prolonging medical treatment you want or do not want such as a “do not resuscitate” order.
• Will – A will helps take care of property that must go through probate. You can appoint someone you trust to act as executor and appoint a guardian or conservator to handle the care of minor children, including adult children or minor children with disabilities.
• Living Trust – A living trust can help you distribute property, avoid probate and minimize estate taxes, especially if you have a large estate. One type to consider is a revocable living trust, where property is transferred to the trust. You control the property while living and you can revoke it at any time.  Upon death, a trustee you appoint ensures property is transferred to those you selected as beneficiaries. An irrevocable living trust avoids probate but requires you to give up your right to revoke.
• Beneficiaries – Beneficiaries include those your assets are transferred to upon death. Be sure to review beneficiaries listed on insurance policies, bank account (transfer on death) and retirement plans including your 401(k) and IRA.
• Asset ownership – Assets that have title ownership can be setup so that the title automatically passes to a co-owner. The co-owner, however, would have to agree to any loans secured for the property. Also, careful consideration of value should be made for titled property which could trigger a federal gift tax.
• Insurance – Insurance policies you should carefully consider can help you cover your debts and even your burial costs. These include life, disability, automobile and homeowner policies.
• Business Succession Plan – For business owners, a succession plan details a roadmap for smooth transition of ownership after death or should you become incapacitated.

What should be included in a Letter of Intent?

Composing a letter of intent or statement of desires should also be part of your comprehensive estate plan, and it is often overlooked. Though not a legally binding document, it can offer your executor guidance. You should include details like:

• Who to notify of your death or incapacitation such as family, friends, attorney, financial advisor, CPA
• Wishes and desires on what happens to your children
• Location of safety deposit boxes, storage units, boat slips, etc.
• Storage of stocks, bonds, annuities and pension documents, and even hidden cash around the house
• Where deeds are stored including home, land, burial plot and titles for vehicles
• Details on insurance policies, financial accounts, loans and credit cards, and it should list any accounts setup on auto-pay
• A reminder to notify the big three credit bureaus of a death, which is helpful in prohibiting fraudsters who watch for obituaries and may attempt to open credit in the deceased’s name
• A list of online accounts and login ID and password credentials (keep this updated every few months)
• Burial desires like cremation, funeral ceremonies, prepaid cemetery plots, organ donation and other special requests
• For business owners, business continuity instructions can provide clear orders as to how you want your business ownership to transfer as part of your business exit planning

It’s important to ensure a trusted designee knows where to locate the letter of intent. Other documents that might be helpful include marriage licenses, divorce papers, military discharge documents and previous tax returns.

Don’t Forget Your Mementos

Something a lot of people forget to do when creating an estate plan is to include their mementos. You may not think any of your cheap furniture or costume jewelry is worth anything, but others might hold sentimental attachments to them. Often, people are hesitant to discuss such matters but ignoring this important part of estate planning can set the stage for fierce battles and even dishonesty as items are removed from the household before others can arrive.

To avoid these types of situations, you might consider giving things away to remove any doubt as to who you want your belongings to pass to. You might also call a family meeting and discuss how you plan to distribute your personal effects after your death, and let members know it will be in writing as part of your will to help ward-off future power plays.

Regardless of how much or how little your estate consists of, comprehensive estate planning can help offset high levels of emotions and unfortunate resentments that can occur after your death. A trusted financial advisor can help you determine the best course of action for transferring property, caring for your family and mitigating taxes. We’ve also published an Estate Plan Guide that will walk you through the process of creating your own estate plan.

Get the 7 point checklist for estate planning. 

Kris Maksimovich is a financial advisor located at Global Wealth Advisors 4400 State Hwy 121, Ste. 200, Lewisville, TX 75056. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network^®, Member FINRA/SIPC, a Registered Investment Adviser. Financial planning services offered through Global Wealth Advisors are separate and unrelated to Commonwealth. He can be reached at (972) 930-1238 or at info@gwadvisors.net.

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