While many people may think of estate planning as an exercise reserved for those with lots of money and/or those of advanced age, it’s important for all of us — not just the old and rich.
After all, life is uncertain for everyone. And no matter your age or wealth, devoting a small amount of time and effort in the present to documenting how you’d like your affairs handled and assets distributed upon your passing can prevent lots of potential anguish and hassles for loved ones in the future. In addition, the documents needed to create a will and living will are relatively simple, and the stakes are high — so when it comes to estate planning, the sooner you get started, the better.
A dozen do’s and don’ts of estate planning
In essence, the process of estate planning involves taking action ahead of time to ensure that your wishes are known and followed should you pass away or become incapacitated. While the process for most is typically straightforward and uncomplicated, there are some common estate-planning mistakes and omissions to be aware of when documenting how your cash and assets will be handled when you’re gone or otherwise unable to share your decisions.
Consider these do’s and don’ts when doing your estate planning — which it’s best to take care of sooner rather than later:
- DO create a will — A last will and testament enables you to specify in advance what you’d like to be done with your money, investments, belongings and other assets when you pass away. And if you don’t create one, these decisions could be left in the hands of a court — and they may not go as you’d prefer. To ensure that your preferences are known and followed, it’s critical to have a will in place before it’s too late.
- … and a living will — Similarly, a living will — also known as a health care directive or an advance directive — lets you formally specify how you’d like for your health care-related decisions to be handled should you become unable to actively communicate your preferences. Some of the medical decisions that a living will can cover include whether or not you’d want CPR performed in certain cases, whether you’d want to be put on a ventilator if unable to adequately breathe on your own, and whether you’d want to receive artificial nutrition via a feeding tube and artificial hydration via an IV if you’re unable to eat and/or drink on your own.
- DO prepare a separate will from your spouse if married — When couples create a joint will, the estate must go through the time-consuming legal process of probate when the first person in the joint will passes. And when this happens, the terms of the will are locked in until the second party passes away. In the meantime, circumstances can change as a result of remarriage, the birth of additional children or grandchildren, the addition, loss or growth of assets, etc. making changes to a joint will after a member of the couple dies can be a complicated process, but the complexities are significantly reduced if individual wills have been created instead.
- DO designate your beneficiaries — By naming your beneficiaries in your will, you can ensure that your assets are given to the people, charities and/or companies of your choosing in the wake of your passing. A failure to name beneficiaries for your assets, such as any cash, funds in bank accounts, investments, real estate and other items of value you may own, can cause added paperwork and delays related to their distribution — potentially creating additional headaches and stress for your loved ones.
- DO create a durable power of attorney — A power of attorney is a legal document that designates a person of your choosing who is allowed to make decisions related to your personal property, finances and (if stipulated) health care if you’re unable to do so. And while a general power of attorney expires when you become incapacitated or die, a durable one remains in place so that your designated representative can still handle important matters when you’re unable or absent.
- DO get help if needed — Even for those whose estates are not particularly large or complicated, getting the guidance of an estate-planning professional can be a good idea. Expert guidance can help ensure that all recommended steps have been completed thoroughly and accurately, helping prevent complications and delays during asset distribution.
- DON’T put off your estate planning — None of us ever know what the future may hold, or when our time for estate planning may run out. And by taking the time to think through and document your estate preferences in the present, you can be certain that your estate-planning duties are complete should the unexpected strike. Especially for those with dependents whose livelihood and well-being depend on them, putting an estate plan in place is critical.
- DON’T forget to name legal guardians — For most parents, and especially parents of young children, ensuring that their kids will be well cared for if they were to pass may be the single most important element of estate planning. And by designating a legal guardian for your children — and for your pets — you can make sure they’re in good hands by naming a family member or friend as their designated caretaker in the event of your passing.
- DON’T name children as joint owners of your assets — If you name children as joint owners of your assets during estate planning, it can expose you and your belongings to a range of unnecessary liability. This is because doing so opens up the possibility of creditors gaining access to your money and other assets should a child fall into debt or suffer a misfortune such as getting into a car accident and being found liable for damages. A preferable, liability-limiting option is to give children power of attorney and name them as a beneficiary payable upon your death, which can enable them to access your assets if needed without exposing the assets to his or her creditors.
- DON’T fail to account for any assets — When doing your estate planning, your residence and the funds in your bank accounts are obvious assets to account for. But estate planning should be thorough and account for all of your assets, especially those of high value. Be sure to make plans for what will be done with all of your assets upon passing — including any stocks, bonds, vehicles, real estate holdings beyond your primary residence, life insurance policies, retirement funds and other investments in your name.
- DON’T overlook sentimental and sought-after items — Beyond accounts, investments and other financial holdings, your estate also includes any collectibles, artwork, jewelry, family heirlooms, prized possessions, etc. that you may own. You’ll want to make sure you make and document your decisions regarding who will inherit all of these belongings, especially if any of your loved ones might have a strong connection to any of them or a heightened interest in attaining them after your passing.
- DON’T neglect to make occasional updates — Of course, as time passes, our life situations and holdings can change. Marriages, divorces, births, deaths, windfalls and a range of other life events can have significant impacts on your estate and its holdings, so you’ll want to review your estate-planning documents from time to time to ensure that all is in order and up to date. Many estate-planning experts suggest reviewing your plans every five years or so, and revisiting them following major life events.
A range of helpful resources
Looking for a guide to estate planning? The Arthur State Bank blog is home to a number of helpful articles on the topic and can serve as something of an estate-planning guide. Some of the resources currently available on the blog include:
- What Are the Steps in Settling an Estate?
- Best Practices in Estate Planning to Maximize Your Trust
- How Do I Know Which Type of Trust I Need?
Further, Arthur State Bank’s trust and wealth professionals are always happy to help answer any questions you may have. To connect with a personal trust advisor, contact us today.