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Be the Main Character in Deciding How Your Estate is Distributed: A Brief Checklist for Creating or Reviewing Your Estate Plan

March 7, 2016

 

 

What do best selling authors Tom Clancy and Stieg Larsson have in common?  The most obvious answer, of course, is that they were both gifted and talented authors whose books continue to entertain millions of readers.  Another thing they shared, however, was dying without a well-designed estate plan.  Clancy, who died in 2013 at age 66, left behind a complex family situation.  Some of his estate went to his current wife and their minor daughter, while the rest went to four adult kids from a previous marriage.  Unclear planning documents, however, led to an expensive dispute over who would pay the taxes on the estate.  Larsson died in 2004 at age 50 without an estate plan at all.  His entire estate was divided between his father and brother, leaving his girlfriend of 32 years with nothing.  The take-away from these two examples is that a comprehensive, concise, up-do-date estate plan is the best way to ensure that your wishes for your estate are carried out and your loved ones are adequately cared for.

 

Whether you are creating your first estate plan or you are reviewing your current plan—something I recommend doing every 3-4 years or after a significant family milestone, such as a birth, death, or interstate move—the following five steps can help you cover your bases.

 

1.  Identify your goals for your estate plan.  Before creating or reviewing your estate plan, consider the following questions.  What do you want to accomplish with your plan?  Do you want to leave a legacy for your children?  Do you want to make sure your spouse is well cared for?  Do you want to be philanthropic?  Those goals dictate the planning strategies that are right for you and your loved ones.

 

2.  Take inventory of your assets.  Even if you have already developed an estate plan, it is a good idea to take inventory of the items in your estate.  This may include real estate, investments, family heirlooms, and life insurance policies.  Also make note of your current liabilities such as a mortgage or consumer debt.

 

3.  Consider what estate planning components you need.  A will is perhaps the first component that comes to mind when thinking about the different elements of estate planning, but there may be additional items as well.  Trusts are great if you have assets that may be subject to probate and if you want to keep the details of your estate private.  Also, a health care directive and power of attorney are essential for setting forth your wishes if you should ever become incapacitated.  Make sure you have the proper tools in place to carry out your estate planning goals.

 

4.  Consider what could go wrong.  This is often a missing step because it is not pleasant to think about what could go wrong.  However, before setting up your estate documents, you should take some time to think about the financial situations and the personalities of your beneficiaries.  For example, do you have special considerations such as leaving money to a beneficiary that may have a difficult time managing an outright distribution?  In such a situation, it is possible to set up a trust that dictates the manner in which that beneficiary will receive funds. 

 

5.  Choose the right personal representative.  The personal representative (also known as the executor or testamentary trustee) is responsible for settling your estate’s affairs.  This task carries a lot of responsibility.  A good personal representative can help make the process of distributing your estate less burdensome for your heirs.  Make sure you choose someone who is familiar with your situation, has the capacity to complete the tasks involved, and is willing to take on the job.

 

While this list is a good starting point for your estate plan, it is not intended to serve as a comprehensive list.  Be sure to consult with an estate-planning attorney to learn about specific strategies that may be best for your unique situation. 

 

 

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