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Is your estate plan outdated?


 is your estate plan up to date


If you still have guardianship provisions for your adult children...


When I meet with new clients and I ask to see a copy of their estate plan, I almost always get the same answer.


We haven’t updated our will in decades.


Often, clients mention that their will still has guardianship provisions for their children…even though their children are now in their 30’s or 40’s.


In reality you shouldn’t be waiting decades to revisit your plan. You should be updating it any time you have a major life change. Change could mean moving states, additions to your family, or marital changes. Beyond that, assets change over time and you might want to reevaluate how you’re splitting your estate.


I keep using the term estate plan because an estate plan is more than just a will. A will is important and a great place to start, but it’s not everything. To really protect your family, you’ll need a will and three other documents.


Keep reading below to learn about the documents you need, where to get them, and how much you should pay. I’ll also talk about some of the issues I see when reviewing estate

plans.


Jeb


 

TODAY IN 4 MINUTES OR LESS, YOU'LL LEARN:


  • Four estate planning documents you need to protect your family

  • Where to get them

  • How much you should expect to pay

  • Three other considerations


 

Why do you need an estate plan?


To protect you, your family, and what you’ve worked to build.


It will protect you and your family in case something happens to you and you’re no longer able to make decisions for yourself.


If you’re unable to make decisions regarding end of life care, it will spell out what life prolonging care you do or do not want.


When you’re gone, it specifies who should receive your assets, be that your spouse, kids, or someone else.


What’s in an estate plan, anyway?


Typically, an estate plan is made of four to five documents, depending on how you structure things.


  1. Will: This is the foundational document of any estate plan. It outlines how an individual's assets should be distributed upon their death. It also allows one to name an executor to manage the estate.

  2. Living Will (Advance Healthcare Directive): This document outlines an individual's wishes regarding medical treatment if they become incapacitated and cannot communicate their decisions. It can specify preferences about life-sustaining treatments, resuscitation, organ donation, and more.

  3. Durable Power of Attorney for Healthcare: This allows an individual to appoint someone to make medical decisions on their behalf if they are unable to do so.

  4. Durable Power of Attorney for Finances: This document allows an individual to designate someone to manage their financial affairs if they become incapacitated. This can include paying bills, managing investments, and handling other financial matters.


Some attorneys prefer to place assets in a living trust to simplify the probate process. A living trust can expedite the asset distribution process by avoiding probate, offering more privacy, and providing flexibility in managing assets during one's lifetime, whereas a will alone must go through the often lengthy and public probate process.


Living trusts have quite a few benefits but they can be expensive and not everyone needs one. Check with your attorney to see if they’re a fit for your situation.


 

Where to get an estate plan and what it will cost


This is the simple part. The easiest place to get an estate plan is through an attorney, specifically one licensed to practice in your state. Most estate planning attorneys offer packages covering the four documents listed above. Expect an extra fee for drafting any trust documents.


If you don’t have an attorney, start out by asking for recommendations from friends and colleagues. It’s likely that one of them will have a suggestion.


You can also check for membership in professional organizations like the estate planning section of your local Bar Association or the American College of Trust and Estate Counsel.


Finally, you can look at online directories. I suggest Martindale, as they include attorney’s peer rankings. I find peer rankings to be more interesting than the awards or lists that many attorneys boast of, which are often pay-to-play.


If you prefer to go the virtual route, LegalZoom provides state specific forms. Likewise, TrustandWill.com offers online estate planning services. I don’t recommend either of them, though not from bad experiences. Estate planning can really cause a lot of pain when something is missed or a document is written incorrectly. I think it’s worth the extra expense to work directly with an attorney on your documents.


Now let’s talk about price. On the high side, the sky is the limit. If you have a taxable estate (over $25.84 million in 2023), then your estate plan will be significantly more expensive, as there is more planning required. On the other hand, if you have a spouse and you want them to receive everything, you can find attorneys to draft all your documents for $750 or a little less.


For a basic estate plan, you should expect to pay between $750 - $2,500. If you need a revocable living trust as well, the price will likely be between $2,000 - $5,000. I realize that’s a wide range, but you’ll find that large firms are on the more expensive side, whereas small firms and solo practitioners have more flexibility in their pricing.


If you have a second marriage and a blended family, expect to pay more as well. Planning for blended families can be more complicated and take more time.


Most attorneys will offer a free consultation. Don’t hesitate to meet with a couple to see whose process and approach you prefer.


 

Other Considerations


Death Binder

Once you have your estate plan built, you need to put a copy of it in your death binder. What’s a death binder, you ask? It’s an organizer with all the information your family would need in case something were to happen to you. Here’s a quick article I wrote explaining the concept. In the binder, you’ll want the following:


  1. Copy of Estate Plan: Self explanatory.

  2. Life Insurance Contracts: Life insurance can be hard to track down. Provide a copy of the contract so your family knows who to contact.

  3. Letter of Intent: This is a more personal document that provides additional information or requests not covered in the formal estate planning documents. It can include funeral arrangements, personal messages to loved ones, or specific instructions about asset distribution.

  4. Guardianship Designations: For those with minor children or dependents, it's crucial to specify who should take care of them if both parents or primary caregivers pass away.

  5. Digital Asset Inventory: In today's digital age, many people have online accounts, digital files, and other electronic assets. This document lists all digital assets and provides instructions on how to access and manage them.

  6. Asset Inventory: It can be time consuming to find details on various accounts and properties. Write a list of assets and locations, along with a general value, to simplify the process for your family. If you or your financial planner has your net worth statement, you can just print the detailed version.

  7. Final Arrangements: Details about funeral or memorial service preferences, burial or cremation instructions, and any pre-paid funeral arrangements.


If you want the organizer I use in my binder, just reply to this email and I’ll send you a copy. It’s a simple checklist that makes sure you have everything.


The goal here is to ease the stress on your family while they’re grieving. Anyone who has grieved knows that it can be hard to put two words together, much less search for documents and make decisions.


My Dad was pretty organized but still, we had to scramble to find things when he passed. I’ve had his laptop in a closet for five years because I can’t find the password and I can’t bring myself to reformat it and lose whatever he had on there.


Beneficiary Designations


Some accounts pass to your beneficiaries outside the probate process, retirement accounts being the most common example. You designate who you want to receive the account and they receive it directly when you’re gone.


When you can add a beneficiary designation, you should. It simplifies things for your executor and it saves money by keeping assets out of probate. It also allows your beneficiaries to receive the assets more quickly, since they won’t be locked up in probate for six months or longer.


The key is to review your beneficiaries at least once a year. I’ve seen couples forget to change beneficiaries after a divorce, which can lead to an awkward situation. Likewise, if your grandkids are listed as beneficiaries, even contingent beneficiaries, you’ll want to update the names and percentages whenever you have a new grandchild.


What about estate or inheritance taxes?


99.8% of estates will owe no estate taxes, which is the good news.


Only the largest .2% of estates, those larger than $25.84 million for a couple, will owe Federal estate taxes. Some states do have lower estate tax exemptions, with Oregon and Massachusetts being $2 million per couple.


The takeaway here is that most folks don’t have to worry about estate taxes. If you are concerned that you’ll run into issues, bring up the size of your estate when you speak with an attorney and they can advise you on your options. Planning for a taxable estate is well beyond the scope of this post.


 

 Here’s what I’m reading




 

-Jeb


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