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Why You Need an Estate Plan

This time of the year is a good opportunity to review important financial and legal documents.

But, many times, people forget to include one of the most important documents. It’s one that protects your family’s future financial security as well as your legacy in the event something unfortunate happens.

And it’s not the legal document you probably just thought of…a will.  It’s important to have a will, but this document can be even more critical to make sure your wishes get carried out.

It’s an estate plan.

Why Do You Need an Estate Plan?

There are three fundamental questions that need to be answered if you die or become incapacitated:

  1. What do you want done if you die or are incapacitated?
  2. Why do you want these things done?
  3. Who do you want to be responsible for making sure these things are done?

A will or trust answers question #1 but doesn’t address the other two. And if your family or loved ones (not always the same people) don’t know the reasons behind your decisions or who you want to carry out your wishes, it can result in confusion, hurt feelings, and (of course) unnecessary legal expenses for your estate and family.

An estate plan provides the “why” and “how” to put your final wishes into effect. It makes clear not just who inherits what, but also your intentions. Plus, it makes it clear who you want to have this responsibility.

So…let’s assume you have a will, trusts, powers of attorney and a health care directive all prepared. What do you need to do to create your estate plan?

Here are the four basic steps you need to follow:

Step #1: Prepare a List of All of Your Assets

This means everything of value. It includes your house (and any other properties), vehicles, investments, retirement accounts…even things like your baseball card and commemorative plate collections.

Assign a dollar value to everything on the list. This will help when it comes time to decide who gets what if you’re trying to split things evenly.

Make sure you also have a list of digital accounts (investment accounts, credit cards, etc.) along with the login ID and password for each.

Step #2: Write a Letter of Intent and Instruction

This is where you explain what you want to have happen and why.

Maybe you decided to will your motorcycle to your favorite niece or nephew because the two of you were cycling buddies. Or you want your estate to leave a bequest to a specific charity you always supported.

A little specific direction and explanation here can save your beneficiaries some confusion and hard feelings, not to mention head off future legal problems.

Step 3: Choose Your Decision-Makers

Obviously, you won’t be here to make sure your wishes are followed. So, you need to pick some trusted people:

  • An executor for your will
  • A guardian for your minor children
  • One or more trustees for trust funds

Make sure you consult with these people before you designate them. They’ll be taking on a big responsibility if you die or become incapacitated.

Step 4: Update Your Plan on a Regular Basis

Having an out-of-date will, estate plan or other estate document can be as bad (or worse) than not having them in the first place.

Your estate plan, will, and related documents need to be updated whenever your life circumstances change such as:

  • Marriage (including remarriage)
  • Divorce
  • New children
  • Death or incapacity of a beneficiary or agent

Beyond these changes, plan to revisit your estate plan at least every five years. You’ll also want to keep your beneficiaries and potential decision-makers updated.

Remember…an estate plan that just gathers dust is just an expensive pile of paperwork.

Work with your financial and legal advisors to keep your estate plan updated so it will be implemented according to your wishes.

Don’t have an estate plan? Or need yours updated? I can help.

Feel free to contact me either through my website (https://mmconnollylaw), email (mmconnolly@gmail.com), or via my Facebook or LinkedIn pages.