Estate Planning Isn’t Just for Millionaires

Dina here…

One of the greatest “gifts” I ever received from my parents did not feel like a gift a first; it was a torturous exercise, truth be told.  Involving me in their estate planning would be something that would offer my entire family peace of mind, but not until much later down the road.

I did not ask to be involved; I actually was uncomfortable looking at my parents’ finances; it felt like TMI.

To put things in perspective, I was not a financial advisor at the time, nor was Tony.  I was in charge of marketing communications for a mutual fund company and Tony (an avid investor) was teaching history.  It was our experience with my parents’ planning that led us to the work we do now.

One of my brothers had helped them take care of the legal part of the equation – wills, health care proxies, trusts, etc. were in place.  But now, we had to make sure everything was titled as it needed to be and that beneficiaries and contingent beneficiaries were properly named (with seven children that was a lot of form-filling).

Assets had to be consolidated from numerous accounts; stock certificates needed a better home than the bedroom closet; their portfolio needed to be realigned based on their increasing medical bills; and investments my father bought back in the 1960s needed a price at purchase (cost basis).  Tony spent a good chunk of his summer break researching average share prices in the library (this was pre-internet).

Here is where the gift part comes in – when my father died in 2004, and my mother in 2015, there was no guessing about anything (not even the music played at the funeral Mass).  Our family was able to focus on being together and mourning my parents; we were not caught scrambling in a panic over the loose ends that we should have tied up when they were alive.

Money had been set aside in a bank account in our names to pay for all the expenses that would arise before the funds were disbursed.  No one was forced to charge thousands on a credit card to pay for the funeral arrangements.

When the heart is heavy, any complications can feel overwhelming; minimizing decision-making is a tremendous help.

Yet, according to the Financial Awareness Foundation, a nonprofit organization dedicated to raising financial awareness and literacy, 120 million adults in the U.S. do not have an estate plan in place.  This leaves them and their loved ones in a precarious position.

People mistakenly think that estate planning is for millionaires, and not the average person.  That is simply not true.  Yes, people with significant assets have more complexities; but everyone needs to have a plan in place to ensure a smooth transition in the event of illness, mental incapacity or death.

I am fortunate that my colleague, Gary Pulford, has experience with the potential issues that can threaten a plan; he is a wealth of information.  You should consult with an estate planner to address your specific concerns, but here are a few basic elements you should have in place:

  • Planning for right now – It is more likely for you to become impaired than to die; becoming mentally incapacitated is not limited to a long-term illness, like dementia.  Anyone can have an unfortunate accident or suffer a stroke.
    • A durable power of attorney will enable someone to handle financial decision-making responsibilities (check-writing, managing assets, etc.). This form must be on file with each institution and on every account that you want to grant someone control over should you become unable to manage your affairs.
    • A living will enables you to state your wishes regarding medical care or end-of-life decisions and a health care proxy allows you to appoint someone to make health care decisions on your behalf.
  • Beneficiaries on IRAs/Roth IRAs and Retirement Plan Accounts – Assets in these accounts are not governed by the will, so make sure the beneficiaries/contingent beneficiaries are the appropriate people.  Divorces, deaths, and the arrival of children/grandchildren may have occurred since you last reviewed your accounts.  Those inheriting the accounts only need to provide the death certificate, so these assets can transition to the heirs very quickly.
  • TOD on Bank Accounts and Taxable Investment Accounts – TOD or “Transfer on Death” acts much like a beneficiary designation works on a retirement account. It allows assets to move seamlessly to heirs once a death certificate is provided.
  • Last Will and Testament – A will gives instructions on how an estate should be handled when someone passes.  It also appoints guardians (for the care of minor children or impaired adult children); trustees (to manage the money and the disbursements); and an executor (who collects and distributes the assets).  It can be used to distribute non-retirement investment assets (without a TOD in place); and hard assets, such as homes, real estate, vehicles and other personal property.  The will is only valid if it is in compliance with the probate laws of the state.  If you have moved to another state, your will should be reviewed.  Likewise, if your will is not current, you should review it to make sure it accurately reflects your wishes.

Among its free publications, the Financial Awareness Foundation has a free downloadable set of forms to organize and document your financial, personal, and family data.  It has an exhaustive list of items to gather, but do not be put off by this.  Rather, use the parts that are only relevant to you.

For a more basic list, check out a blog I wrote a long time ago when I deemed estate planning as an unpleasant task.

I understand why this is a chore many avoid – I really do.  But I can also say – as the daughter of parents who did the right thing – when you have this in place, it removes some stress off of your loved ones at a time when their hearts are burdened enough.

Let that be your parting gift.

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