John Allen, Jr., AEP®, AIF®, CTFA® | Market President, Greenville, SC
When it comes to estate planning, there is a well-known adage that has withstood the test of time and that families and individuals should heed: By failing to prepare, you are preparing to fail.
For most people, estate planning and preparation do not rank high on a “to do” list. The reasons vary but often center on these four:
• I don’t want to think about dying.
• It is too complicated.
• It costs too much.
• It is only for the rich.
Given those reasons, it is not surprising that most people lack a will or estate plan. Research by Caring.com – a leading website that provides information about taking care of aging parents, spouses and other loved ones – found that less than one-third (32%) of Americans have created estate planning documents. That’s a decrease of nearly 25% in just three years. Caring.com also found that older adults are less likely to have a will. Fewer than half (48%) of the people surveyed aged 55 or more had a will in 2020 compared to 60% in 2019.
Rather than think of the hard work that must be done to create an estate plan, there is a better way to look at it: Estate planning is not about you. It’s about your family, heirs and other people and organizations you want to provide for. Without an estate plan or will, the courts (state law) will decide who gets your assets, and you lose control of how your hard-earned wealth will be distributed. A well-designed and clearly written estate plan will also help avoid conflicts among family members when your estate is distributed.
Estate planning can be a challenging and emotional endeavor. But here are four tips to make it easier and to help you prepare for the future:
1| Work with an experienced estate planning attorney
Estate planning is not a task to delegate to a friend-of-a-friend who knows a thing or two about writing a will. You want to work with an experienced, licensed estate planning lawyer so you can rest well at night knowing your documents comply with state law and that the language clearly explains how your wealth should be managed.
You also want to work with a professional who is familiar with estate and inheritance taxes, so you are maximizing the wealth being transferred to loved ones and other beneficiaries. Talk to your trust officer or financial advisor (if you have one) about who they would recommend you work with to get your estate in order.
2| Write a letter of instruction
A signed letter of instruction, also known as a letter of intent, is an informal document that provides your family and others with vital information. It can outline how your tangible personal property should be distributed, your funeral and burial wishes, and the location of your will and related estate planning documents.
The letter is not legally binding, but most executors will abide by your instructions. The letter can also contain other important messages you may want to pass on to your family, such as:
• My wishes for my spouse, children and grandchildren are:
• An experience I hope you get an opportunity to have is:
• When you encounter hardship, I hope you will remember:
3| Create an “end of life” file
Estate planning is an essential part of providing for your family’s future. But to accomplish that goal, you must make sure all the necessary documents have been created and that they can be quickly located if you pass or become incapacitated.
One way to help your loved ones find all of your estate documents is to create an “End of Life” file. The file should contain the following documents:
• Will, trust & other important estate planning documents
• Estate plan
• List of tangible and intangible property
• Letter of instruction
• List of financial accounts and insurance policies (with log-in information and passwords)
• Email accounts
• Passwords, PINs or other log-in information to your computers and phone
4| Review estate planning documents annually
An estate plan is not the type of document you create and then set aside to gather dust on a shelf or in a filing cabinet. There will be expected and unexpected events in your life that will affect the plans already in place. The birth of a grandchild. Significant increase or decrease in financial assets. Marriage or divorce. Disability or extended illness of your spouse (or you). These are life-changing events that could affect your wealth and how it should be distributed in the future.
Review your plan annually with your estate planning attorney and financial advisor to ensure that it still meets your needs and intentions. We suggest you review your estate plan when you gather your annual income tax information each year.
Estate planning is not a go-it-alone project. It involves managing a lot of different documents, many of which should be reviewed by a lawyer to be sure your wishes are carried out and that they withstand any legal challenge.
So do yourself and your family a favor. Don’t procrastinate. Prepare for the future by having an estate plan in place that will help you support your loved ones.
