Estate Planning Guide

What You Should Consider

At a minimum, an estate plan allows you to select someone you trust to make decisions on your behalf after your death, or if you become incapacitated. It enables your wishes to be carried out quickly and smoothly and helps you determine the degree to which probate can be avoided.

Your plan should be tailored to your specific needs, but generally would include:

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

Important Topics to Address

• Beneficiaries. Some assets pass outside of probate by virtue of a beneficiary designation or the manner in which title is held. Therefore, it is important for you and your financial advisor to review the ownership and/or beneficiary designation of these assets to be sure that they will be distributed according to your wishes upon death. Learn more about protecting assets of your married children.
• These assets include:

-Jointly held property
-Life insurance proceeds
-Retirement benefits
-Employee death benefits
-Retirement plan proceeds

• Asset Ownership. Assets that have title ownership can be set up 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 a smooth transition of ownership after death or should you become incapacitated.

What Documents Are Used for Planning?

Core documents generally include:

• Durable POA. This document allows you to authorize someone, called an agent, to handle your financial matters if you were to become incapacitated. Without a durable POA, your family members would have to institute legal proceedings and request that the court appoint a guardian to carry out these responsibilities. By addressing the possibility of incapacity in advance through a durable POA, you and your family can avoid the expense and potential hassle of having a court-appointed guardian.
• Healthcare POA. With a healthcare POA, you authorize an agent to handle your healthcare needs in a manner consistent with your intentions in the event of your incapacity. This includes permission for the agent to authorize actions regarding the continuation of life support, nutrition, and hydration, as well as to deal with general healthcare decisions that may arise. Some states authorize a secondary healthcare document, typically called a living will. It works in conjunction with a healthcare POA, authorizing your healthcare providers to take specific action if there is no reasonable hope of your recovery. It also serves an important function when the agent or other individuals you named in your health care POA are unable to make a decision on your behalf relative to continuing life-sustaining treatment.
• Will. A will allows you to direct who will receive your property upon your death and under what circumstances. It also enables you to direct the payment of estate administration expenses and taxes and nominate an executor to handle these matters. Even more important, it allows you to designate a guardian for your minor children.
• Living Trust. With a living trust, you can plan for the management of assets during your life, if you become incapacitated, and upon your death. A trust can also help minimize potential federal or state estate taxes. Generally revocable, a living trust is the centerpiece of a well-rounded plan. When a living trust is established, the process of distributing assets at the time of death will not be subject to the jurisdiction and oversight of the probate court. A revocable living trust ensures property is transferred to the trust. You control the property while living and you can revoke it at any time. An irrevocable living trust avoids probate but requires you to give up your right to revoke.

Areas Often Overlooked in Planning

• Mementos. You may not think your 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.
• Care for Pets. A pet trust establishes a legally enforceable obligation for your trustee to use the funds in the trust for the care of your pet in the manner that you have established:

-The trust is valid during your lifetime, should you become disabled, and ensures the care of your pet
-The trust also remains valid after your death
-Trust assets are not part of your probate estate
-Trust provisions allow you to determine who will care for your pet and how, according to your wishes

A Word About Digital Assets

• Online Financial Accounts. Most of us maintain at least some personal and financial information online. We pay bills online and keep contact records digitally. Although this digitizing of information makes it easier to store and recall, it also presents some concerns when it comes to accounting for all of these “assets” in your estate.
• Digital Assets. These include your online social accounts. Examples include personal email accounts, websites, blogs, images, videos, and online photo storage accounts. Digital assets also include social media accounts such as Facebook, Instagram, Twitter, and LinkedIn.
• Value. The assets may or may not have value. For example, you might own a domain name for your small business, which would have value, but the photos you uploaded to Shutterfly have sentimental value only.

Even if you give your logins to a family member, he or she may run up against service agreement limitations. These limitations may deny him or her the ability to access, manage, distribute, copy, delete, or even close accounts. Further, “unauthorized use” laws can lead to legal issues for your representatives. Especially if they are deemed to have exceeded permissible access levels.

What Should I Do with Digital Assets?

• Memorialize. Decide how you want your online life handled after your death. Facebook, for example, allows a personal administrator or immediate family member to close the account or “memorialize” it. This may help ease your loved ones’ pain during a time of grief.
• Inventory. Create a comprehensive inventory of your digital assets. Be sure to store this inventory somewhere other than an e-mail account. Some e-mail providers, like Yahoo!, will close an account that has been inactive for several months and delete the e-mail history. Even if an executor contacts the e-mail provider, they may have time to copy important e-mails or contacts before deactivation. Back up important information elsewhere and update it regularly.
• Document Value. Don’t assume your digital estate has no value. Some frequent flyer points are transferable after your death. Generally, credit card cash-back features are redeemable after your death, but only if claimed. Internet domain names are potentially sellable, and blogs are a form of intellectual property.
• Password Manager. Consider investing in a password manager. Sites such as LastPass and Dashlane maintain a record of your online accounts and passwords in a digital safe. Set them up to transfer the passwords to your representative at a specific event, such as your death or incapacity.

Offer Your Executor Guidance With a Letter of Intent

Composing a letter of intent or statement of desire should be part of your comprehensive estate plan. Though not a legally binding document, it can offer your executor guidance.

Include who, what, and where 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
• The location your home, land, and burial plot deeds are located, along with vehicles titles
• Details on insurance policies, financial accounts, loans, and credit cards, and it should list any accounts set up on auto-pay
• A reminder to notify the big three credit bureaus of a death. This helps prohibit 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
• Business continuity instructions can provide clear orders as to how you want your business ownership to transfer

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.

We’re Here to Help

Your financial advisor can coordinate efforts with your attorney and tax preparer in creating an estate plan that suits your needs and purposes and helps achieve your financial and personal goals.