So, I Have This Friend…

If you don’t have an estate plan, you are wrong.

˘My wife and I had breakfast with a friend the other day. She’s a really smart lady who’s getting a little older like us. No, I’m not calling her old and I won’t venture to guess her weight. But she’s been on earth for a while, and like us, she knows no one lives for ever. She’s also aware that planning for that certainty is often overwhelming for some. Her included. Maybe I should say she has lots of experiences and not mention age. Yea, she’s seen some things in the multi decades of living.

They mostly talk about their jobs, family, and other friends. I generally don’t contribute much to these conversations and enjoy listening to them talk about the latest happenings. On this particular morning, a topic came up that sparked me to participate more than usual.

The topic started with something like “I need to get a will done”. Oh, that caught my attention! Believe it or not, wills are very important. There’s not one person reading this that will not leave this earth some day. That’s a 100% guarantee. We leave everything behind in this imperfect world. As you know, you leave this world like you came into it. You leave with no earthly possessions like money, houses, investments etc. Also, I would bet that every single one reading this does not know when it will happen to them or their loved ones. They are sure it will happen, but unsure of when.

Oh, I’ve heard this statement many times or one very similar. For some reason, frequently it’s when people are getting a little older and feel somehow that it’s “time”. If you know when you are going to leave this earth, just schedule doing your will and other financial documents before you go. For the other 100% who don’t know you’re departure time, you owe it to the ones you leave behind to do your part. The time of passing is beyond your control. Getting the documentation in order for that time is definitely within your control. A will is only one document you need to have in place. There’s more, much more.

A properly executed will leaves directions for your executor to carry out your wishes with the things you leave behind. The things you left behind are called your estate. This is your chance to tell the executor of your estate how to carry out your wishes. The executor is the one charged with legally and properly dispersing things of title, such as houses, cars, boats etc. The executor is also the one who ensures any outstanding bills such as phone bill, medical, credit cards, etc. Access to bank accounts, investments, and other financial accounts will also need to be accessed to ensure payments and distributions are done promptly and properly. Just because you are gone doesn’t mean your affairs can go untended. Properly setting up the executor will ensure this part goes as smoothly as possible. Make sure the person you chose to be your executor is trustworthy, responsible, and stern. MawMawFI always says marriage and funerals always bring the crazy out in a family. So, despite best intentions, the executor may very well find himself in the middle of a heated family fued over how your family thinks your estate should be handled. It’s going too fast, slow, etc. Johnny wanted that and so does Jenny. Simple things are compounded by the heightened emotions of your recent death.

Every state has its own laws about how to handle an estate in a person’s death. So, when you set up a will, make sure you are meeting the states requirements. If you feel uncertain about how to make your will, seek a competent estate lawyer who specializes in this area. You’ll be surprised how many decent local law firms really do care about helping you do this important document correctly. On the other hand, there are scammers out there. So, ask around, check references, etc. A will is a very important document that must be given the proper amount of attention.

If you don’t have a will in place, most states will ensure your estate is distributed in accordance with their laws. That would likely include hiring a lawyer to act as an executor. The executor will act in accordance with the law. Without a will, the state appointed executor will not have clear direction from you on how to proceed. Not only will the executor not know your wishes, they don’t do that for free. So, while they are doing a good deed, they are expensive. So, take the time to ensure everything you worked for, saved, and want to go to whoever, actually goes there. Take the time to get your will done, filed and be prepared.

There’s other things you can do beyond just a will to help. On many bank accounts, there’s an option for a payable upon death (POD). The POD allows someone access to your money as soon as you die. This is important so things like bills get paid. Maybe just long enough to sell a house, pay for your funeral services, or whatever. But having been through this with a close family member, there will be unanticipated expenses that will come up. Having access to at least some of your money to pay bills is very important.

Investment accounts will have a beneficiary. Make sure you take the time to ensure your beneficiaries are updated. Life happens and things do change. For example, maybe your spouse passed before you and the spouse was the beneficiary. Now you have a problem during your death because your beneficiary has predeceased you. That will tie up assets way longer than if the beneficiary was just updated properly.

Life insurance also has beneficiaries. Frequently older parents have very old life insurance policies that they haven’t updated in decades. Don’t be that guy. Ensure that if you have a life insurance policy, the beneficiary is current. If the policy’s beneficiary is deceased, that will bring on it own set of problems by involving possibly two estates and even more people having a legal claim to it. So, just keep your life insurance policy beneficiaries current.

Things that have beneficiaries are not included in the estate. Passage goes directly from you to the person identified. This is an important distinction, so make sure you consider that for how your estate is ultimately distributed.

All of the documents mentioned here need to be updated periodically. Major events like marriage, divorce, death, births, and even family disownment do happen. So, ensure that maybe annually or whenever a major family event happens, crack open these documents to ensure they still match your current wishes. It’s great to have these in place, but you must also periodically update them.

Once you have the above Big Rocks in place, also consider if there are special circumstances you’d like to take into account. These things may not have title, but special things can cause strife in a family if not identified before you pass. This can usually be accomplished with a letter to the executor. Things to consider here are items that are particularly special to you or a family member. Maybe it’s your mother’s wedding rings. Maybe it’s grandad’s old shotgun. Maybe it’s a stamps collection, a special chair, jewelry, or tools. Whatever it is that is special to you for someone to receive, write it in the letter.

You should also have a few medical documents drafted at the same time as your will. These are important to relieve your family members of difficult decisions. When you are in the middle of a family emergency like a life threatening car accident, surgery, or terminal illness, that not the time to be unorganized. The minimal documents you should have are as follows:

Medical power of attorney. This is a document that tells the medical community who will speak for you and make decisions for you when you are unable. It’s also important to make sure that these are done while you are still medically able and in sound mind. This will come into play if you are in the middle of a surgery and the doctors need to maybe do something different. It’s not prudent to wake you up from surgery and ask. So, the medical power of attorney lays out this important decision before the surgery starts. This also will carry on if you become unable to act for your self due to dementia, a coma, or brain injury.

Directive to Physicians. This document lists the things you do or do not want done to you while you are receiving medical care. If you are in a terminal situation, do you want to be kept on life support indefinitely? Do you want them to “pull the plug” early? Are there religious reasons you would refuse something like a blood or organ transplant? Are you against artificial feeding tubes, kidney machines etc.? As much as you don’t want to think about this now, you should. To leave this up to a loved one in a time of need would be worse. I’d bet every one of your loved ones will be stressed out enough during this time. They don’t deserve to have to try to guess your desires in such serious matters. Please get this done as well.

If you have a complicated family structure or complicated estate, you may want to consider a living trust. This is a way to put your assets “in” a trust to separate it from your personal estate. It will cost a little more up front to set up and execute a trust, but it eliminates the probate process. Basically you can put bank accounts, titled vehicles, investments, etc in the trust’s name instead of your name. You can still use these for every day things, but upon your death, the instructions to distribute the trust’s assets are already defined. It’s a little more complicated, so please ensure you find a competent estate lawyer to explain this to you before you set this up. You’ll also want to talk to your tax professional to make sure that the tax consequences are understood as well.

So, as you can see setting up a proper estate plan is a fairly complex undertaking. Ensure you do your part while your are able. To set up your estate plan is your responsibility. If you do it for nothing else, do it to prevent complicating your loved ones during what will already be a stressful time. You owe it to them.

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