Estate Planning is Not Just for the Rich

May 17th, 2019 by Jim Allen

Thinking about death is an uncomfortable topic for most people. Then, when you phrase it as “estate planning”, most people just say “well that is for wealthy people” and rationalize that they do not need to do it. The reality is that everyone needs to plan for what happens with their eventual death or incapacity. While the truly wealthy may need more sophisticated planning to reduce taxation and protect wealth, everyone needs to have at least what we call “the big five” essential estate planning items. These documents are critical regardless of how much wealth you have and can provide peace of mind that your family will know what to do if something should happen to you.

Health Care Power of Attorney / Living Will – This document will appoint someone to make your health care decisions if you are unable to make them yourself. The document also spells out your wishes in terms of life support, feeding and pain alleviation, organ donation and other health care items. By clearly spelling out your wishes, you can avoid the potential family conflicts which can occur when you haven’t made your intentions clear.

• Financial Power of Attorney – This document appoints someone to manage your financial affairs if are unable to yourself. The power of attorney typically doesn’t become effective until you have been judged incapacitated and then allows your power of attorney to pay bills, make investment decisions and make other financial transactions on your behalf.

• Will – Without a will, the state determines who will receive your assets using a process called intestacy. While the state’s intestacy rules may ultimately pass your estate to your intended beneficiaries, this isn’t always the case. For those with minor children, a critical part of the will can be naming guardians for the children. Again, without this in place, the courts will decide who is guardian and family conflict may result.

• Up-to-Date Beneficiary Designations – For most people, their IRAs, 401(k) s, annuities and life insurance policies are the largest part of their wealth, and pass via a beneficiary designation and not the will. We often see that these are not up-to-date and a deceased parent or an ex-spouse is listed as the beneficiary. It is important to know that the beneficiary designation overrides your will or your intended wishes so that ex-spouse will get your life insurance proceeds if the designation isn’t current.

Survivor’s Checklist – This very important document is the tool to help your family deal with the process of handling your personal affairs when you die. The document can be used to list your assets, bank accounts, insurance policies, pensions etc. It can also be used to define your last wishes such as burial or cremation, preplanned funeral arrangements and contact information for your advisors like your attorney, CPA or financial planner. As client of Anchor Bay Capital, your personal financial website can serve as this resource for your loved ones.

As you can see, much of what these documents provide has no nothing to do with how wealthy you are. Their role in the estate plan is to provide a path for an orderly transition of your estate to your loved ones and make that job easier during a time of grief. Keeping your estate plan up to date is just another part of our comprehensive financial planning approach. If you would like a beneficiary and estate plan audit, please contact us.