When was the last time you thought about your legacy or estate plan? When was the last time you asked yourself – “what would happen if I die or become incapacitated”? Have you asked yourself – “will my children be protected or will my family be able to easily take over my financial affairs?” “Will my ex-husband or wife be awarded the sole custody of my children and receive access to their entire inheritance?” These are fears that attorneys hear from their clients all the time.
Unfortunately, when it comes to taking an action to plan for an undesired event, we are often paralyzed by our fears of the unknown. Our fears often trump our intentions of protecting our assets and caring for the loved ones (we like to call this, “our legacy”).
Obviously, thinking about our own death or incapacity is not the type of “happy thought” we often like to have. But, for the sake of your family, it’s crucial to develop and implement a practical estate plan that will help your children and loved ones learn about your desires and navigate your financial affairs after you pass away (or, in the event you become incapacitated). Understandably, your loved ones will be in the midst of an emotional nightmare if something happens to you. And, you don’t want to make things even worse with added frustration and confusion if they are left to figure out your financial affairs without any guidance.
Below are four easy steps that will help your family deal with these challenges:
- Create an estate plan, including your will, trust, and power of attorney, and keep it up-to-date.
You should have a will, trust (in most cases), living will, HIPAA release, and durable power of attorney for your financial assets. These must-have documents will help you and your family to take care of you if you ever become ill. Importantly, the proper estate planning may allow you to preserve your assets from creditors and maintain your eligibility for Medicare benefits in the events of catastrophic illness. Moreover, once you pass away, your will and trust will ensure that your assets are passed along and preserved in accordance with your wishes.
- Grant permission to your family members to access to your bank account to pay for the immediate expenses.
When an awful incident happens, your immediate family members (likely your spouse) will have to make sure that your on-going bills, such as your mortgage, car payments, and other bills are paid continuously. The easiest way to give your family members a quick access to the necessary resources (your bank accounts) is to make sure that each of your bank accounts has a payable-on-death provision that transfers the account after your passing. Alternatively, your power of attorney allows your designated family members to access your bank accounts and write checks on your behalf. If you become incapacitated or die, your designated person would have to produce the power of attorney and your death certificate to the bank, and he or she will be able to access your account and pay the ongoing bills on your behalf. It is the necessary step that any estate planning attorney should advise you upon.
- Create a list of every financial asset, obligation, and banking/brokerage relationship you have.
It’s not enough to have an estate plan in place, you need to organize the information in a transparent way and keep it in an easily accessible place. Your family members should have access to a cheat sheet that summarizes all your investments, brokerage accounts, insurance policies, and debt/loans you have. Without it, your family members will be forced to conduct an endless search of your family files, accounts, and records in an attempt to compile your financial information. Some information and assets might even get lost. Your loved ones will always wonder if they were able to find all your assets.
The easiest way to compile your financial information is to create an encrypted file (or print a hard copy of this information tucked into a filing cabinet or a water and fireproof safe). Don’t include any account information, passwords, social security numbers, or other sensitive personal information. Instead, instruct your trustee or executor of the will that all account numbers and online passwords are written down and stored in your bank’s safe deposit box. For security purposes, you want to segregate the description of all your assets from the sensitive account information and passwords.
Moreover, you should describe the safe deposit account’s location and who has or knows where the second key from the safe deposit box is located for a quick reference.
- Make sure that you communicate your plans and locations of key documents.
Inform your family members that you have created the estate plan and the master list of relevant information for their references. If you don’t’ want to share this information with your family yet, you need to tell them where the master list is and provide them instructions and summary of your wishes. Make sure that you actually keep the master list and other estate planning documents exactly where you have told your family members they would be.
Importantly, you want to review your estate planning documents and a master list of assets at least once a year to incorporate all changes in your financial situations and family composition. Typically, your estate planning firm, like ours, will have an annual maintenance program that will update all your estate documents for a low annual fee.
Disclaimer: This article is intended to serve as a general summary of the issues outlined therein. While this article may include general guidance, it is not intended as, nor is it a substitute for, a qualified legal advice. Your receipt of this article from Lexern Law Group, Ltd. (the “LLG”) or any of its attorneys does not create an attorney-client relationship between you and the LLG. The opinions expressed in this article are those of the authors of the article and does not reflect the opinion of the LLG.