Birth, death, marriage or divorce … these life events are usually the catalysts that prompt people to do something that lingers on financial to-do lists: creating or updating an estate plan. College graduation is another milestone families should use as a reason to revisit their plans. When your son or daughter was young, you needed an estate plan to name a guardian. Now that your child is old enough to live alone, you need a plan to decide whether and how you want to distribute your assets.
Soon after your adult child tosses that cap into the air, it’s a good time to talk about making changes to the documents. Unfortunately, there is no easy way to conduct family conversations about finances, especially not estate planning. The reason is obvious: “Because feelings and money get tied up,” says psychologist Lisa Damour.
To start the process, it is helpful to establish your goals. Do you want to ensure your assets will be passed to the next generation and beyond? Are you worried one of your heirs will squander money left to him or her? Do you want to be charitable? Are you anxious about offending one of your heirs?
It might seem easy to use online resources to create your estate plan, but these questions can be tough to navigate alone. That’s why it may be helpful to discuss your concerns with a CERTIFIED FINANCIAL PLANNER™ professional and a qualified estate attorney. By doing so, you can build a plan that addresses the issues that currently exist, without getting bogged down contemplating the next 50 years.
Revising your estate documents – or updating your financial plan, for that matter – are not one-time responsibilities. It is important to remember to revisit both every few years – and at life events.
Here are the basic documents you are likely to discuss at your estate plan review:
- Will: Ensures assets are passed to designated beneficiaries, in accordance with your wishes. In the drafting process, you name an executor, the person or institution that oversees the distribution of your assets. If you have minor children, you need to name a guardian for them.
- Letter of Instruction: This may appoint someone who will ensure the proper disposition of your remains. This sounds creepy, but it’s important if you choose a method of internment contrary to your family’s tradition.
- Power of Attorney: Appoint someone to act as your agent if you are incapacitated. That person can act for you in a variety of circumstances, like withdrawing money from a bank, responding to a tax inquiry or making a trade.
- Health Care Proxy: Appoint someone to make health care decisions on your behalf if you lose the ability to do so.
- Trusts: Revocable (changeable) or irrevocable (not-changeable) trusts may be useful, depending on your family and tax situations. In 2017, the first $5,490,000 of an estate (twice that for married couples), is exempt from federal estate taxes. If an estate is above the threshold you may want to consider a trust.
While you are at it, be sure to create a master list of contact information for the CFP® professional, estate attorney and CPA who will handle the estate. It should include current addresses and Social Security numbers of all the people named in the legal documents, a list of all account user names and passwords, and a list of automatic payments with the names and contact information of each payee.
As your child is graduating, you’ll want to offer a gift to mark the milestone. One of the most valuable you could offer is a well-planned estate, prepared with the help of a CFP™ professional. Instead of untangling a mess when you’re gone, your heirs can follow concrete steps you’ve laid out for them, while they have the time and space to mourn.