Yes, Everyone Needs a Will

When I talk to people on my podcast, Jill on Money , I always ask whether or not they have completed their estate planning documents. Loyal listeners know that the question is coming, so when they have not done so, they sheepishly say, “I know, I have to do it!” Given the number of people who listen to a daily personal finance podcast and have not addressed this important task, I am using National Estate Planning Awareness Week (October 21 – 27), to cajole as many people as possible to get it done.

The point of properly planning an estate is to head off difficult decisions at the end of your life and to help transfer your assets to your intended heirs without too many snags. The three basic documents that help you accomplish this herculean task are:

1. Will: A document that ensures that assets are passed to designated beneficiaries, in accordance with your wishes. In the drafting process, you name an executor, the person or institution that oversees the distribution of your assets. If you have minor children, you will also name a guardian.
2. Health Care Proxy: Appointment of someone to make healthcare decisions on your behalf if you lose the ability to do so.
3. Power of Attorney: Appointment of someone to act as your agent in a variety of circumstances, like withdrawing money from a bank, responding to a tax inquiry, or making a trade.

While I am partial to hiring a qualified estate attorney to assist you in drafting these important documents, if the choice is doing nothing or going online to create them, search away. Also note that many companies now offer estate planning services as a corporate benefit.

Additionally, here’s some lessons that I have learned first-hand about estate planning, after serving as co-executor on a few different estates:

• Estate Planning is a process, not an event. If you are starting from scratch, know that these are living, breathing documents that can be updated and amended as the years progress. Knowing this fact should help you prioritize getting something done over making it perfect.
• Choose your Executor carefully. There is nothing inherently difficult about serving as an executor, BUT it does take time, patience and the ability to organize a myriad of administrative tasks. I found solace in a spreadsheet, which helped me keep track of the estate settlement progression, but you can use any system that works for you.
• Probate can take a long time. Probate is the process of providing a state court with a will of the deceased. A judge in Surrogate's Court must find that the will is legally acceptable and once that’s done, the?Executor?is appointed to distribute the estate (everything of value) and carry out the wishes of the person who died. While all of this sounds as easy as registering a car, probate can vex even the most dutiful executors.
• Avoid drafting documents after receiving a diagnosis. It is hard enough to process devastating medical information in real time, but asking patients and their families to make a series of difficult financial decisions on top of the health issues puts them under immense emotional stress. Of course, if you have done nothing up to the day you get the bad news, there is little choice but to plough ahead.
• Consider a Letter of Instruction. This document can cover certain things that are outside the will, like the disposition of your remains and your desired funeral arrangements, which can be important if you are choosing something that is contrary to your family’s tradition.
• Communicate where important documents and user names/passwords are: Although this sounds like a terrible idea for security purposes, your heirs need to have an itemized list of your accounts (with a contact name, phone number and e-mail address), your insurance policies (private and employer-based), a list of automatic pay accounts with name and contact information of each payee, housing, land and cemetery deeds, mortgage accounts, vehicle title, partnership and corporate operating agreements, previous three year's tax returns, marriage license, divorce papers, military discharge information.
• Provide a list of contact information: Include names, current addresses and Social Security numbers of all people named in the estate documents, as well as the contact information for the estate attorney and CPA who will be handling the estate.
• Utilize Transfer on Death accounts. Many more financial institutions offer the ability to designate a beneficiary of non-retirement bank and investment accounts, which allows ownership of the account to be transferred to the designated beneficiary upon your death and generally avoids probate.
• Weigh the value of a trust. A trust comes in two forms, revocable (changeable) or irrevocable (not changeable). The biggest advantage of a trust is that trust assets avoid probate and can provide a more precise way in which to transfer assets. However, in some cases a trust can overly complicate the planning process and add to the cost of the estate plan.
• Mind the real estate. If you are leaving real estate to a non-spouse, there are a number of costs that need to be factored in: the on-going payment of a mortgage, taxes, utilities, maintenance, to name a few. You may want to leave extra money to the heirs of the real estate so that they do not have to pay for these costs out of pocket, while the asset is being prepared for sale.
• Communicate the plan. As hard as it may be to talk to your loved ones about this emotional topic, have these conversations while you still are able to do so. Remember that this process is a gift to your heirs, something that will help them manage the disposition of your estate without extra hassle. It is also a gift to yourself because completing the process (and updating the documents when there are life events or reviewing them every 3-5 years) will provide you with peace of mind.?