Beyond Legal Documents: Planning Strategies for a “Good Ending”

 

When people hear the words “estate planning,” their first thought usually turns to legal documents: wills, living wills, powers of attorney, trusts, and the like. These documents are very important and all adults should have at least the first three prepared with the assistance of an experienced estate planning attorney.

 

There is more to settling a person’s financial affairs, however, than legal documents. There are many steps that people can take on their own to distribute property and simplify decision-making for themselves and their heirs. Below are 12 strategies to increase the odds of having what I refer to in my book, Flipping a Switch, as a “good ending.”

 

¨     Simplification and Downsizing- Many people have “asset sprawl.” Estate planning will always be easier when there are fewer items to manage and dispose of. Consider selling, gifting, and/or donating unneeded possessions and consolidating similar types of financial accounts (e.g., growth mutual funds and traditional or Roth IRAs).

 

¨     Net Worth Calculation- Annual updates of net worth (assets minus debts) provide a status check for your finances and can make it easy for the executor named in your will to begin the process of tallying up the value of your estate. Be sure to share updated calculations with your executor and trusted loved ones.

 

¨     Emergency Contact Cards- The American Red Cross, health departments, and law enforcement issue emergency contact cards to carry around with you in the event of an emergency or disaster. The cards include a person’s name, address, and phone number and emergency contact people to call or text, if needed.

 

¨     Financial “Notebook”-  This does not have to be an actual binder or notebook. It could be available digitally in the cloud or on a flash drive. The point is to have one “go to” place for all of your financial information such as these worksheets from Rutgers Cooperative Extension and Schwab.

 

¨     Digital Asset Inventory- You will find it useful and your survivors will thank you if you prepare a written inventory of your digital accounts (e.g., computer passwords, financial and shopping accounts and social media). Another option is to use a password manager account and share the password with your executor and trusted loved ones.

 

¨     Beneficiary Designations List- It is wise to regularly review the beneficiaries and personal representatives listed in your financial and legal documents such as tax-deferred retirement savings plans, life insurance policies, and wills. Use this worksheet to record all of your beneficiary designations in one place.

 

¨     Untitled Property Planning- Untitled property (a.k.a., your “stuff”) must be sold, gifted, donated, and/or disposed of when you pass away. This process can be greatly simplified by performing some of these tasks during your lifetime. The Cooperative Extension program Who Gets Grandma’s Yellow Pie Plate? has many helpful ideas.

 

¨     Task List for Survivors- Survivors will appreciate a list of people and businesses to call (e.g., Social Security, pension plan, final employer, credit cards) and things to do (e.g., memorial service songs/prayers, personal property transfers, disposition of ashes) when a loved one passes. This list from AARP provides some helpful suggestions.

 

¨     Written Obituary- If you want certain things said about your life achievements and one less stressful task for heirs, write your own obituary. Some people write two: a short version for local newspapers and a longer version for placement on memorial websites. Obituary templates, sample obituaries, and writing tips are available online.

 

¨     Pre-Planned Funeral- Some people pre-plan and pre-pay funeral expenses to decide the arrangements that they want and spare survivors the stress and expense of decisions made at a time of grief and anguish. State laws govern funeral pre-planning and more information can be found in this Federal Trade Commission publication

 

¨     Gifting and Philanthropy- Advantages of lifetime gifting of cash and/or property include decreasing taxable estate value, downsizing, and watching gift recipients enjoy their gifts. The 2021 gift tax exclusion is $15,000 per recipient.

 

¨     Communication with Surrogates and Heirs- Legal documents and lists are of no use if nobody knows that they exist or where to find them. Share this information and the thinking behind them in face-to-face conversations.