Family relationships are so fundamental to our personal identity and so often they are complicated. During a time of grieving and mourning over the death of a loved one, family relations can become even more emotionally charged. Although none of us can avoid death, it is possible to minimize potential family conflicts through advanced, careful estate planning.
The process may seem daunting if a family has experienced divorce, re-marriage, includes step-children, real estate holdings, a family business, and/or extensive personal property. However, an estate plan (and a family meeting) can not only help avoid family tensions, but also minimize the cost associated with distributing your property after your death.
Learn the Basics First.
While you consider where you want your money and possessions to go after you are gone, it is important to become educated about your state’s laws and options regarding probate, wills and trusts, Powers of Attorney, living wills (a.k.a. advance directive), etc. There are many factors that determine whether a will is the most effective and appropriate legal document, or perhaps a living trust will better serve your interests. Your age, the value of your overall estate, your marital status, how many children you have – all of these elements are key to determining what legal and financial documents will best guide distribution of your estate.
It’s Your Property, So It’s Your Decision.
You may already have an idea of where you want some of your personal belongings to go upon your death. You may also have a favorite charity or worthy cause where you would like to designate a bequest. It’s best if you decide where you want your valuables to go ahead of time, and draft the legal instruments to ensure the probate process happens in an orderly manner; otherwise, your estate distributions will not be clearly defined. In the absence of a legal document such as a will or trust, the court systems are left to disseminate your assets. In addition to the often lengthy amount of time this takes, it is also costly, and can diminish the value of your overall estate significantly. It is much better for you to determine and have legal instruments document your intentions in advance.
Communicate and Organize.
In addition to documenting your wishes, organization and communication with loved ones is an important step. Depending on your family’s history and values – discussing your overall intent and the reasons why you have made some estate decisions will help avoid subsequent surprises and reinforces your wishes. Consider asking your financial advisor to coordinate a family meeting, either in-person or virtually, in order to gather loved ones together to discuss your wishes and plans. While you may not want to share specific details on bequests, it’s important for everyone to know your general plans. In addition to discussing what your wishes are upon your passing, it’s equally important to share what you would like to happen while still living. For instance, if circumstances don’t allow you to remain living on your own, where would you like to go? Live with a child (which one)? Is there a retirement community that you’re interested in? What would you want to happen to your home during this transitional time? These conversations may not be easy, but having them early helps ease some of the emotional decision-making later.
Another key to facilitating your affairs is to keep your legal, insurance, and financial documents together – and let a few trusted people know exactly where these files are located. It is important to remember your Digital Assets as well; passwords and data stored online will need to be accessed. Many people also compile their wishes for religious and burial services in this same place. A great tool to help you keep all of this organized is a Personal Record Organizer; work with your financial advisor to start one – just remember to update it when something changes.
Since most of us don’t have the ability to see the future, how and when “we meet our maker” is a mystery. (One we hope won’t be solved for a very, very long time!) However, it is best to prepare and document who you would like to be designated agent of your living will, he or she will help you carry out your wishes in order to protect your interests. There are forms to help you document your wishes in this area often available at your community hospital and online. Remember that every state’s estate and probate laws are different, so ultimately you will wish to consult your selected legal and financial professionals to assemble your comprehensive estate plan that maximizes value and minimizes family discord.
Financial Planning Association
Beneficiary: A person, business or entity who have been named to receive assets
Living Trust: Also known as a Revocable Living Trust or a Family Trust, a legal document that holds title or ownership to real property and assets.
Living Will (Advance Directive): A legal document that a person uses to make known his or her wishes regarding life prolonging medical treatments. Also known as an advance directive, health care directive, or a physician's directive.
Power of Attorney: A person who is granted legal authority to make decisions for an individual or “principal.”
Probate: After a person dies, ownership (the legal title) of his or her property, assets and personal effects must be passed on (legally transferred) to heirs. "Probate" is the legal name given to this process.
Will: A legal document appointing an executor/executrix that sets forth your wishes regarding the distribution of your property and the care of any minor children upon your death.
Heidi Clute, CFP® of Clute Wealth Management in South Burlington, VT and Plattsburgh, NY, an independent firm and registered investment advisor that provides strategic financial and investment planning for individuals and small businesses in the Champlain Valley region of New York and Vermont. Clute Wealth Management and LPL are separate entities. The opinions voiced in this material are for general information only and not intended to provide specific advice or recommendations.