Marianne came waltzing into my office, but her words did not fit her peaceful smile.
Stunned, I looked quickly at her husband, Ted, who explained. “We finally took your advice. We met with a lawyer and got our wills done.”
Smiling, I congratulated them. I had been working with them for years and had suggested this important financial step numerous times. Like so many people, they had put it off. Marianne and Ted’s relaxed state demonstrated the peace they felt that “all was in place.”
After confirming their health was fine and they were looking forward to retirement in two years, we discussed two essential planning pieces of their estate plan: what documents they had signed and who knew where those documents were.
Ted and Marianne learned the basics of estate planning and were happier for it. Here is a primer and how to best be prepared for your death, disability, or other changing needs.
Documents
People say they need a will when the proper term is “estate plan.” Why an estate plan? We all have estates, which essentially is what we own, have control of and our physical needs. The will is just one document that you need. Our lives have many diverse aspects.
Be sure you consider the whole estate plan and understand the purpose of each document.
Power of attorney: A legal document allowing another person, the power of attorney (POA), to make financial decisions for you if you should become incapacitated. All POA powers terminate at death.
Read: ‘It broke me’: Everyone says you need power of attorney, but nobody tells you how hard it is to use
Will: A will is relevant only after you die. This piece of your estate plan appoints an executor to distribute your assets to your beneficiaries, who are noted in the will, per your written directions.
Healthcare directive: This legal document allows a designated person to make medical decisions for you if you are unable to make them for yourself.
Trust: An optional document that may smooth the management of your money is a trust. Not everyone needs a trust document. There are different types of trusts. Some are established while you are alive, others after your death. You establish in the documents who manages your money, who receives the money from the trust and other details. Having a trust does not mean you do not need the other estate planning documents.
Read: 3 reasons a trust may make sense for your family even though your name isn’t Trump, Gates or Rockefeller
Your estate planning documents should be established where you are a legal resident at the time of your death. If you did your documents when your children were young and now are retired and living in another state, it is time to update your legal paperwork.
Marianne’s experience demonstrates that while many people find the idea of these documents scary, there is power in knowledge. Once she had hers in place, she was more relaxed and ready to plan for other parts of her life, rather than her demise.
Trusted people and professionals
The toughest decision many parents have to make is assigning a guardian to a child or children if they die before the age of majority. Most parents of young children never want to think about this, and it is a very rare occurrence. Sue and Chris did not have a will and learned their next of kin would be responsible for their children if they were both to die. This fact caught their attention. Neither were close to their siblings and Chris’s parents were elderly. They knew they had to put something in place legally to care for their two school-age children. Understand what will happen to your responsibilities and assets when you die.
Read: Don’t leave a clueless trustee behind in your estate plan
Knowing what is going to happen to your care, money, and children if you are not around often motivates people to create their estate plans. They need trusted professionals and allies to make this happen well.
There are many people who say, “You do not need a lawyer to do a will.” That is true. And with free wills online and financial people even selling “packages” for you to fill at an attractive price, people balk at the cost of hiring a professional. Yet, understanding your estate plan is more involved than filling in the blanks of a mass-produced form.
Read: Should I do an online will? Avoid these pitfalls.
There are a host of reasons why a lawyer is recommended to do your estate-planning documents. You especially need a lawyer if you have a complex situation. These can range from young children to disabled children to properties or a business that will need to be sold off. Lawyers do this every day as their profession. Leaving your estate in someone’s hands who has never closed out an estate before is a risky move.
The price you pay now is invaluable for two reasons: First, your heirs have an experienced professional to assist them during a difficult time. Second, when your life situation changes or the laws change, you have a resource to keep you and your documents aligned with the current tax and estate laws.
Read: My cousin left his estate to 6 relatives, but only one cousin, worth $30 million, received the inheritance — due to an ‘unexpected surprise’
Instead of sending someone out without a paddle or life preserver, give them the guidance they need to handle the details of your estate. This may be your last best gift to them.
What to ask and who to tell
The sticking point for many people is knowing who to ask to take care of their financial, physical, and post-death desires. Some know right away and think of their spouse or a sibling or friend. Others let this decision stall the whole process.
Before you sign the documents, think about who you trust to carry out your wishes. They will be in charge. Of course, you need to establish beneficiaries; however, you need an executor, trustee, power of attorney and healthcare advocate.
These important people are the ones who need the time, energy and ability to make decisions to be clear and help follow through on your wishes. Do not surprise them. A trusted friend needs the chance to accept this duty before you sign the documents. Otherwise, the transition and implementation of your plan may not work well.
Read: Your estate plan might be outdated because it excludes digital assets
You may not want to tell people the details of your financial life beyond what their duties are to be. However, someone has to know your plans. If not the details, then who your lawyer is and where to find the documents.
If you have a complicated situation such as family property or a business, you may have to make some tough decisions. Telling adult children ahead of time may prevent problems in the future. Or maybe not. If you decide to distribute a family home in a certain way that does not look equal or give it all to charity, be sure to leave a trail of your rationale behind whether in a video or paper trail.
Remember this is your money. What you do with it during your lifetime is your choice. If you want it left according to your wishes, those choices must be left in a legally written document. Today you have a choice on how to approach that process.
Marianne and Ted are not alone — not many of us want to think about the inevitability of death. However, may their situation remind us all that taking the time and effort to be sure our loved ones are cared for when we die will make us feel better now. Perhaps you, too, will be relaxed and smiling when your documents are complete.
CD Moriarty, CFP, is a Vermont-based financial speaker, writer and coach. She can be found at MoneyPeace.com.
