If National Estate Planning Awareness Week, which started yesterday, snuck up on you this year, you are not alone. In fact, if you don’t have an estate plan, you have lots of company. Surveys by the National Institute of Aging show that nearly 50 percent of Americans lack a will and other vital estate planning documents, and their absence is a sure path to probate court and often lengthy, costly legal proceedings before an estate is settled.
We consulted our colleague, Raymond Radigan, Atlantic Region Managing Director of Trusts for The Private Client Reserve of U.S. Bank, and devised a list of seven questions that Sacramento-area readers should ask as part of creating an effective estate plan:
Do you have a current estate plan in place that details how you want your estate distributed? Usually we put off creating an estate plan because we do not want to worry about the future. Talking to the right professionals, creating a wealth plan starting today, and putting an estate plan in place for the future allows you the freedom from worry. Once you create the wealth and estate plans, you will know that you have taken care of your future self as well as your loved ones.
Have you designated beneficiaries for investments such as insurance policies and retirement accounts? So often people take the time to create probate, avoiding estate plans, using a revocable living trust — and then fail to correctly designate beneficiaries on insurance policies and retirement accounts. This can create a dual administration situation, where your loved ones will need to administer both the trust and a court probate. This can be a costly mistake.
What are your plans for your “digital” assets? These can include everything from a music collection to a Facebook page. Make an inventory of valuable or significant data, online accounts, and digital property, and how to access it. Create a password list and include the location of the list in your estate plan. Describe where each account or digital property item is located and why it’s valuable. Keep it updated, and be clear in your estate plan how you want your digital property handled in the event of incapacity or death.
What are your plans should you become incapacitated? Important documents to prepare include the financial power of attorney (an agent who can make financial decisions on your behalf), the health care power of attorney (an agent who can make health care decisions on your behalf) and advanced health care directive (a document that dictates how you want to be treated if you are terminally ill). The failure to have these documents in place may cause a loved one to have to use your money to obtain a Conservatorship in order to help pay your bills or to take care of you. In California, a Conservatorship can be a very costly and time-consuming process that you can avoid with appropriate planning.
Is your current estate plan right for you today? So many estate plans were created to avoid estate tax when the federal estate tax exemption was low. Currently a high estate tax exemption means that federal estate tax is no longer as important an issue. Some of those estate plans meant to decrease estate tax may now have negative implications on income taxes and property taxes. Talk to your estate planning and wealth planning professionals to discuss the income tax and property tax implications of your current estate plan.
Are you in a stage in your life where you need to start transferring your business or wealth to the next generation? At some point in your life it becomes important to look at the assets and businesses that you are managing and ask yourself if it is time to start the process of transferring those assets and businesses to the next generation. It is important to create a wealth plan and revisit it often in order to make for a smooth transition to your loved ones. Discuss these issues with your estate planning and wealth planning professionals.
Do your parents have an estate plan in place? It is important to have open conversations with your parents about whether or not they have an estate plan in place. Talking about this with your parents now may help you avoid problems later.
These are serious and sobering issues, but answering these questions now can save thousands of dollars and months, or even years, of delays and frustration for the people you wish to provide for in the future. Even if you have an estate plan in place, take this opportunity for a comprehensive review to ensure it keeps pace with changes to laws and with your own family’s circumstances, then repeat the process every three to five years.
Heather E. Gross, a Trust Officer of The Private Client Reserve of U.S. Bank in Sacramento, contributed to this article.
- Investment products are: not a deposit, not FDIC insured, may lose value, not bank-guaranteed, not insured by any federal government agency.
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