Welcome to episode 71 of the One for the Money podcast. I am both glad and grateful you have taken the time to listen. In this episode, I’ll share about an estate plan checkup, for those that have one and for those that don’t.
In this episode...
An estate plan is an absolutely crucial part of one’s financial plan. Over a lifetime you accumulate assets—real estate, investment accounts, a classic VW van, etc. When you pass away, there needs to be an orderly way for these assets to be distributed to those people you want to receive them. An estate plan is the way to carry out your wishes. Otherwise, the state of your residence, i.e. California, Hawaii, Texas, etc, will decide how it is divided up amongst your family. And if your estate is of significant value, you’ll have a lot of people claiming to be your family.
Because estate planning is a critical piece of better planning it is one of the five financial planning domains I focus on with my clients. These five domains are investments, income (aka cash flow), Insurance, taxes, and Estate planning.
Of those five domains, estate planning is the one most often ignored and that makes sense for a few reasons. We usually have a long time before we have to worry about it so it’s easy to put it off and the second reason is that no one wants to consider their own death. It’s rather depressing. But despite these facts, it’s incredibly important that any adult who owns real estate and or has children must have an estate plan.
For those who already have an estate plan in place, I say well done! You should commend yourself for doing what far too many do not.
But even if you already have one it’s important to complete a periodic check-up of your plan. Here is when to consider a checkup:
First, When was the last time your estate plan was reviewed? If it has been ten years or more you will want to review it to ensure it reflects your current desires and circumstances and that the people who are assigned as the decision-makers are the people you still want.
The second reason to consider a check-up is if there have been substantive changes in your life or the life of your beneficiaries. For example: marriages, divorce, births, adoptions, or even challenges faced by your beneficiaries (such as health events or substance abuse) all of which can change how you might wish to distribute your assets. Additionally, moving to a new state can affect your estate plan due to differing laws, so a review is advisable when relocating.
Now if you have reviewed your estate plan and everything reflects your current desires and circumstances the next thing you need to do is ensure your loved ones know about it. Do they know where to locate the documents in the event they are needed? Do the people who will make the financial and medical decisions on your behalf, know they have that responsibility?
It would be helpful to rehearse such a scenario to see how it plays out. The military practices scenarios to ensure they have made the necessary preparations as do firemen, policemen, lifeguards, and other professionals. It would be wise to consider what would happen if you and your spouse were incapacitated and couldn’t make a decision-what would happen then. Would the person named in your durable power of attorney documents know they are making the decisions and what you wanted them to decide? This is especially relevant for those of you in the later stages of life (70s and above). An older family member of ours recently had a health event, that put our preparations to the test. For a year before we had expressed the need to get the estate planning documents in the hands of the decision makers only until this recent scare had this been remedied. It’s wise to...
