Often times in Financial Planning the least enjoyable topic for clients is Estate Planning. Honestly, Estate Planning is uncomfortable. Some people get very uncomfortable – and that’s for many reasons.

Most people get uncomfortable because they are discussing a planning topic that won’t see a benefit until something bad happens. Whether it be death, disability, or incapacity, there are many different Estate Planning considerations that must be accounted for when crafting your overall financial plan.

Estate Planning focuses primarily on two main topics. What happens to your stuff (cars, home, investments, personal property) when you pass away and how your family will be taken care of when you are gone or no longer able to do so.

So, who needs an estate plan? You do. I do. Everyone does. And the best part is that a proper Estate Plan can be a simple process to complete with just a few easy steps.

For a lot of people, Financial and Medical Powers of Attorney — along with proper titling and beneficiary designations — will provide a good solid base for their Estate Planning needs. A simple will ties everything together for a lot of people.

Alternatively, some will need a little more than just these items. For instance, there may be a need for life insurance to fund special needs situations or dependent care. A Revocable Trust may be needed to help direct the wishes of a decedent after they have passed away. In addition, Estate Plans can help avoid Estate and Gift taxes, as well as name trusted individuals that you want handling your affairs when you cannot.

Even though an Estate Plan can be completed in a very short amount of time there needs to be a focus on the goals and objectives that the plan is trying to achieve. The slightest oversight or incorrect information can have perilous consequences if not handled correctly.

So how does someone go about creating an Estate Plan that functions along with their overall Financial Plan?

Step #1

Take an inventory of all assets and liabilities. List everything you can think of that is important to you, or your loved ones. Also make sure you list your debts like auto loans, mortgages, and credit card balances.

Step # 2

Working with your CFP® professional, attorney, and tax professional, create an action plan. Establish your primary wishes and goals. Determine where you want your assets to go, who you want to have handle your affairs, both during times of incapacity, as well as after you pass away. Also, think about who may play important roles such as being the guardian of your children or the Trustee of your trust.

Take your time with this step. I can’t emphasize this enough. When I discuss estate planning, having a proper mapped out plan will save time and money when working with your attorney.

Step #3

After you have created a plan where you are comfortable with all aspects of the plan design the next step is to put the plan into action. As you begin to engage with your financial planner and estate-planning attorney, you will want to start with the basics.

Properly titling assets is the first priority. This will allow your attorney to properly refer to specific accounts, especially for a trust.

Next you will want to ensure that beneficiaries are properly designated. Beneficiaries do not need to be people. Beneficiaries can be people but can also be a trust, a church, a charity organization, etc. Alternatively, if needed, you can at this point assign asset management.

From there your attorney will take over. They will draft your will, or a pour over if there is a trust to be put in place, reinforce asset titling and beneficiary designations, as well as name a guardian if you have minor children.

At this time, they will also draft medical and financial power of attorney documents. These documents will act as a guide for your named agent allowing them to act in your best interests in times of incapacity.

If necessary, this is also the time when trust documents will be drafted.

Step # 4

Regularly review and update your plan and plan documents. I recommend that you review your Estate Plan regularly (every other year) to make sure that your wishes are still the same, your beneficiary designations align with your wishes, and your plan documents are also in alignment.

It also makes sense to review your documents with your adviser and attorney; especially as your life circumstances change (new children, death of a loved one, sudden wealth). This is especially important, as your adviser team will know of any new law changes that may have an impact on your plans.

So, how much is an estate plan? That will depend on the complexity of each situation but most basic estate plans can be drafted for anywhere between $750.00 – $2,000 minimum and as high as $5,500.00. Again, each individual circumstance will have a different price point.

Perhaps you are not sold on why you should have an estate plan in place. You have filled in your beneficiary forms so you are all set, right? A story that I like to tell my clients revolves around a friend of a friend.

My friend’s friend got married at an early age to his high school sweetheart. After 10 years of marriage they ended up getting divorced. After a couple of years, he met a new lady and they were married and soon thereafter had two little girls. They were married for about 3 years before one night my friends friend was killed in a car accident.

But, everything should have been ok, at least financially, for his widow and children because he had ample life insurance in place to cover his family in case of an accident.

Unfortunately, he had purchased those insurance policies when he was married to his first wife and never changed the beneficiary forms. Even though his will indicated that his possessions and financial account were to go to his new wife, the law says that beneficiary forms are considered primary over wills so his new wife did not receive any proceeds from the life policies.

This is the reason that proper Estate Planning is crucial to the success of a financial plan. You never know what will happen or when.

If you are working with a fee only CFP® financial planner, then an Estate Planning action plan and implementation should be included in your annual retainer or AUM fee. If it is not, I would recommend working with a different adviser. The only additional fees should come from the attorney for drafting the documentation and their miscellaneous costs.

At Olympia Ridge, we look at a new client’s estate plan almost immediately after beginning a new client relationship. We then work on the estate plan with clients throughout the first year. Having a proper estate plan in place is far more important to our clients financial well-being than their investment portfolio mix; which is the reason for not delaying our process in this area.

After the plan is in place, we schedule regular checkups each year to review the plan and the documents. We also screen attorney’s on your behalf, set appointments, go to the meetings you will have with the attorney, and work with them throughout the document drafting process to ensure the documents you sign are in fact what you want.

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