Getting Your Ducks in a Row (An Estate Plan as a Gift)

An estate plan is one of the greatest gifts you can bequeath to your loved ones. If you’ve been putting off your estate planning, taking the initial steps can be daunting—but liberating. Here is how to get started today, one hurdle at a time.

The Importance of Estate Planning

Fact: When you pass, you will leave behind an estate, and somebody will need to settle it. Your estate may be worth a little or a lot, but there’s no escaping death and taxes.

So why do so many families put off their essential estate planning until push comes to shove?

Since 2015, Caring.com has been conducting a periodic survey of Americans’ estate planning habits. Its most recent results suggest the pandemic has spurred an uptick in estate planning, especially among younger adults. That’s good news. But still, an enormous divide remains:

Some 60% of those surveyed agreed it’s important to have a will. But, as of December 2020, only about a 30% of them actually had one.

Among those without a will, the top reason cited across multiple years remained the same:

“I haven’t gotten around to it.”

No surprise there, especially given the logistical and emotional stumbling blocks involved. Plus, most families are plenty busy with interests that seem more immediate … right up until they’re not.

Estate Planning Is an Act of Love

In short, if you’ve been procrastinating on your estate planning, you’re not alone. But regardless of your age or net worth, let’s correct that oversight today, because …

A well-structured estate plan is one of the greatest gifts you can bequeath to your loved ones to reduce their stress load during an already stressful time.

According to a 2018 EstateExec survey, it typically takes just under 700 hours to settle an estate valued between $1–$5 million. Every painful task and each extra hour you can take care of in advance will be one more way you can give back to the loved ones you leave behind, granting them the space they’ll need to grieve and process the emotional toll of their loss.

Estate planning also brings important practical advantages to nearly every family:

Clarity:
Your actual wishes are far more likely to be realized if you’ve written them down and made them legally binding.

Speed:
Your estate is likely to settle far more quickly, with less red tape and fewer frustrating delays before your beneficiaries receive their inheritance as hoped for.

Cost Savings:
Faster settlements usually translate to fewer costs.

Tax Benefits:
Estate planning can include basic and advanced strategies for facilitating a more tax-efficient wealth transfer.

Protection:
By addressing potential problems in advance, distributions are less likely to end up in the wrong hands, such as estranged family members or debt collectors.

Step-by-Step Planning

So, what’s stopping you from getting a grip on your estate planning? We commonly hear about three hurdles that stand between you and an effective estate plan. These include: (1) deciding who gets what, (2) making it legal, and (3) getting (and remaining) organized.

Hurdle #1: Deciding Who Gets What

A great first step is to think through what you’d like to have happen after you die.

Who are your heirs and other beneficiaries? How much should each receive? Who’s going to get your vintage bomber jacket and grandmother’s pearls?

Don’t become overwhelmed by trying to control every detail. Instead, start with what leaps to mind as your greatest possessions, goals, and challenges. You can always build on this base over time, but your biggest benefits will come from resolving that which you care about the most.

Who Gets What? A Handy Checklist

Estimate your net worth, including assets and debts. For now, just ballpark it.
Identify key beneficiaries, including heirs, charities, and any other significant relationships.
Think about how you would like to divide the bulk of your estate among your beneficiaries.
Think about prized possessions you would like to pass on to specific people or places—such as collectibles, heirlooms, keepsakes, and historical memorabilia.
Consider to whom or what entity you might like to leave these particular possessions.
Identify who you’d like to name as legal representatives and/or administrators, to settle or manage your estate once you pass. (As described in this AARP post, “Things to Know About Being an Executor of an Estate,” ask them if they are actually willing to accept the role.)
Identify conflicts of interest, such as multiple heirs each hoping to inherit the family cabin.
Also identify anyone you might want to explicitly exclude from inheriting anything, such as ex-spouses or estranged family members.

Hurdle #2: Making It Legal

Once you’ve got an idea of what you’ve got, to whom you’d like to leave it, and how you’d like to implement your plans, the next step is to create a legal road map for others to follow.

It’s possible to tackle this hurdle on your own, but we don’t usually recommend it. Any missing or misguided legal language can sabotage your best intentions. As such, a generic template rarely replaces a reputable estate planning attorney who takes the time to get to know you, translates your wishes into legally binding documents, and collaborates with your financial partners to seek the strongest outcomes for you and your beneficiaries. After you’ve established the relationship, it also will be easier to maintain your estate plans over time.

What if you die intestate (without a will)? It usually takes a lot more time and money to settle even a simple estate, leaving a spouse, parent, or adult child with extra work during a painful time. Plus, your heirs will likely inherit less, as extra settlement costs eat into their inheritance. You’re also opening the door to ugly, and even costlier infighting if your potential heirs don’t see eye to eye.

Another common question is which legal document(s) will best serve your needs:

A Will

Nearly everyone should have a will to specify who gets what when you go. If you have minimal net worth and obvious beneficiaries, a basic will might do it. You typically name one or more executors to move your estate through probate (the legal process for carrying out the terms in your will). Your executors can be family members or professionals such as a trust service.

A Revocable Living Trust (RLT):

You might want to supplement your will with a revocable living trust (RLT). You should also still have a will, to settle any assets that remain outside of your trust(s). But an "RLT" lets the bulk of your estate bypass public probate, which usually means a more rapid, private, and cost-effective settlement. It also can resolve complex family dynamics that a will alone cannot address. For example:

What if you want your second spouse to be supported financially during their lifetime, with the remainder left to children from a first marriage?
What if your children aren’t yet ready to manage their inheritance?
What if an heir’s spouse is a spendthrift?

With an RLT, you can establish different instructions to oversee your estate over time and across these and other scenarios. For example, this is how we've guided the management of our personal investment assets after we're gone.

Other Specialized Trusts:

If you’re preparing for a business succession, philanthropic endowment, multigenerational legacy, a disabled child, or similar goals, a specialized trust may help minimize tax ramifications and facilitate optimal outcomes.

Various trusts can also be combined with targeted insurance coverage to help fund critical financial gaps. For example, what if you co-own a business, and your spouse would prefer to be bought out by your partners once you pass? Life insurance may be an affordable way to resolve the challenge.

Hurdle #3: Getting It Together

You’re nearly to the finish line, so don’t stop now! No matter how carefully you’ve structured your legal documents, it can be difficult for others to settle your estate as intended if your affairs are in chaos. So, once you’ve formalized your estate plans, the final hurdle is to complete the goals you established during your initial “Who Gets What” planning. In other words, it’s time to organize the important loose ends—and keep them organized over time.

How Do You Get It Together? A Handy Checklist

List your financial assets in detail (investment and bank accounts, retirement plans, etc.).
List who should receive specific collectibles, heirlooms, etc. (typically accompanied by broad language in your will or trust, pointing to this adjustable list).
List key professionals your trustees, executors, and/or beneficiaries might need to contact (such as your financial planner, accountant, and estate planning attorney).
List other helpful information for your trustees or executors: Where will they find your will, trust, and any additional estate planning documents (marriage/divorce certificates, military records, etc.)? Where do you keep your house keys, wallet, security codes, computer logins, etc.? What about a favorite babysitter, pet sitter, or nearby neighbor?
Make sure there are provisions for the care of your digital assets (email address, social media accounts, electronic storage access, etc.)
If you’ve got an RLT, make sure you’ve funded it with most or all of your major assets, otherwise the trust can’t fulfill its purpose.
With or without an RLT, make sure your home(s), vehicles, and other major assets are correctly titled (Who owns what: you, both of you, your trust(s), a lending company?)
Make sure all beneficiary designations are correct and current in your financial accounts, retirement plans, and insurance policies.
Go through your home(s) and clear out any decades of accumulated clutter. Don’t burden your heirs with this painful duty.
Review each of these steps annually to adjust as needed for births, deaths, marriages, divorces, moves, financial changes, career changes, legislative updates, etc.

Last but not least, let’s touch on security. Even once you’re gone, your private information needs to remain private, to protect against identity theft, legal challenges, and other concerns. And yet it also needs to be relatively accessible to your legal representatives and administrators. That’s a tricky balance to strike, and one more reason to use a reputable password manager to securely store all your logins. We suggest selecting one that lets you name an emergency contact who can access your account once you’ve passed. Or, if you already have a password manager in place, now is a great time to set up this important role.

How Can We Help?

Of course, it’s possible to skip all three of these hurdles on your way to the estate planning finish line. If you don’t say otherwise, your state’s laws typically govern who gets what. You also can let the chips fall where they may on who gets to settle your estate (assuming they can find it).

But make no mistake: If you do nothing, you’re still doing something. It just may not be the “something” you and your loved ones would prefer. If you’ve been procrastinating on your estate planning, we hope our summary has served as a source of inspiration. At any time, we stand ready to help you navigate past your estate planning hurdles, and to connect you with the relationships and resources you need to speed you on your way. That’s what we’re here for!