Estate Planning Made Easy
In this report, you will learn ways estate planning can be easier than most people believe. Key takeaways include:
- Why everyone has an estate plan
- The Filbrandt Estate Planning Process
- The importance of implementing the plan
- The potential costs of postponing the creation of an estate plan
There is a misconception that estate planning is only for the very wealthy, but the reality is everyone has an estate plan; when you do not make the decisions regarding your estate, that job falls into the hands of the State. The question is how closely their plan aligns with yours. Another misconception is that an estate plan is only necessary when you die, but a complete estate plan also addresses important items during your life.
Creating an intentional estate plan does not have to be as painful or difficult as many people perceive; the whole process can be completed in a few weeks. Moreover, once it is complete, you will sleep better knowing that you are prepared for the inevitable and the unpredictable.
The initial step of deciding you are ready to take control of your assets and your family’s future can be intimidating; thoughts of death and leaving loved ones behind are not pleasant. However, seeking the advice of a CERTIFIED FINANCIAL PLANNER™ who knows you and your situation can help make it less intimidating. The planning process is designed to make achieving your goals as painless as possible. Generally, when seeking to establish an estate plan, you will contact an attorney, provide them background on your family and financial situation as well as your goals. They will then draft documents for you to review before finalizing and implementing the plan.
The Initial Meeting
The estate planning process through Filbrandt is often more in-depth due to the close relationship with our clients and our understanding of all aspects of their financial and family circumstances. Along with an Estate Plan Audit, we ask our clients to complete a questionnaire that helps them to identify goals including charitable goals, people to fill key roles, family situations that may require additional planning, and other considerations that may impact their estate plan.
We then meet with our clients to discuss the questionnaire in detail, answer questions, and provide them with additional things they may want to consider. Two key questions that get answered during this phase are how the client would like their assets to be distributed and the agents they would like to name to make decisions on their behalf, if necessary. Key roles include:
- Guardian. To care for minor children (if applicable) if the client is unable to do so.
- Executor/Trustee. To distribute estate/trust after death according to the client’s desires, as stated in the documents.
- Property Agent. To make decisions regarding assets during life in the event the client is incapacitated.
- Healthcare Agent. To make decisions regarding healthcare during life in the event the client is incapacitated.
Based on the discussion, the adviser explains various estate planning tools and techniques that may be appropriate for the client and prepares them for the meeting with the attorney. These tools vary from simple to complex depending on circumstances. Some of the instruments used in estate planning include Wills, Powers of Attorney, Revocable Living Trusts, designations, and lifetime gifts. More complex plans may also include Limited Liability Companies, Grantor Retained Annuity Trusts, Irrevocable Life Insurance Trusts, Charitable Trusts, or Qualified Personal Residence Trusts.
Engaging an Attorney
Once the client feels comfortable with their goals and agents, an attorney is engaged to provide legal guidance and prepare the documents. We can introduce the client to an attorney if they do not have one. Then a meeting is scheduled with the attorney to discuss the family and financial background along with the agents and goals; we will attend those meetings with our clients when possible.
The attorney takes that information and drafts documents for the client to review; we will also review these documents to ensure they capture the client’s intents and desires. The review process also provides an opportunity to verify the names and relationships of the individuals named are correct.
Once the documents have been reviewed, any questions are addressed, and any desired changes are made. A meeting to sign the documents is arranged and the documents are effective upon signing.
Due to frequent changes in tax laws, it is recommended to review estate planning documents and consult with the attorney every two to three years to ensure the exact desires are still reflected. If drafted correctly, the documents should not require updating unless distribution, plans and goals, or desired agents have changed or there is a significant change in family, financial situation, or the federal tax laws.
Implementing the Plan
Once you have gone through this process the final piece is to implement the plan by coordinating asset titling and updating beneficiaries to align with the plan. This step is often neglected and without proper implementation, the many benefits of the newly created estate plan may be minimized or lost altogether.
The Potential Costs of Postponing an Estate Plan
Regardless of the reason estate planning is postponed, it is essential to note the alternative to responsible planning is a much more painful and expensive process.
If a client is incapacitated without having Powers of Attorney in place, the family must hire legal counsel to have a guardian appointed. This can handcuff loved ones by delaying access to client accounts for the client’s benefit and preventing them from making medical decisions on the client’s behalf. The process of having a guardian named by the courts costs more and is more difficult than naming a guardian in the estate plan.
Passing away without an estate plan (referred to as “intestate”), forces assets to pass through the probate process, generally lasting six to nine months.1 Additional costs such as hiring legal counsel, obtaining a bond to secure the estate, or litigation resulting from heirs battling over assets will far exceed the cost of putting a complete estate plan into place now. Many people place undue pressure on themselves to create the “perfect” estate plan. While an estate plan should be carefully thought out, it is better not to delay the process by trying to “perfect” it and risk having no plan in place when you need it.
1. Wills do not avoid probate, but assets titled to your Revocable Living Trust do avoid probate.
Bhatia, M. C. (2016). Estate planning made easy. The Filbrandt Report, 16(11). www.filbrandtco.com
The information provided is not, nor is it intended to be, legal advice. You should consult your attorney for advice regarding your individual circumstances.
Circular 230 Disclosure
We are required by Treasury Regulations (Circular 230) to inform the readers of this material that, to the extent that the information contained herein concerns federal or state tax issues, such information was not written or intended to be used, and cannot be used, for (1) avoiding federal or state tax penalties or (2) promoting, marketing or recommending to another party any transaction or matter addressed herein.
- To learn about Medicare, read this report: 6 Things You Need to Know About Medicare
- To learn more about the benefits you will lose in retirement, read this report: The 4 Employee Benefits You Must Replace When You Retire
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