7 Estate Planning Essentials

7 Estate Planning Essentials

For most people, estate planning looks something like this:

“When all is said and done, more was said than done.”  – Lou Holtz

Anyone who has helped in the estate resolution process for a loved one knows it can be either an enormous pain or relatively painless (excluding the loss of your loved one, of course). The level of difficulty is almost certainly determined by the planning or lack thereof done by the deceased. The general public has erroneously focused their estate planning primarily on estate or “death” taxes. But according to the Center on Budget and Policy Priorities, only 2 out of every 1,000 estates will owe Federal Estate Tax as of 2017. I suspect even less now with higher estate tax exemptions levels.

An unfortunate side effect of that statistic is once people realize that the federal government will not be coming after them for estate taxes, it can cause complacency. In reality, there are many reasons estate planning is valuable that extend far beyond federal estate taxes.

Regardless of how successful people are, I see plenty of people who have not put their wishes in writing. Beyond that group, there are plenty more that have wills and estate plans that are drastically out of date — they may include people who have pre-deceased them or that they are no longer in contact with for whatever reason. Ensuring that you have an estate plan that is up to date can save months or years of painstaking effort for whoever ends up responsible for dealing with your estate.

And to reiterate a point above that might have just been skimmed over, just telling people what your plan is is not the same as having a written plan. Verbal agreements almost never hold up because they are not legal. Your wishes need to be in writing and in all likelihood, they need to be notarized and properly executed by an attorney. If done improperly, your wishes may not be honored by the courts.

With that caveat out of the way, there are actions that every person nearing retirement should consider when it comes to effective estate management. What follows is designed to be an overview and by no means exhaustive. Do your research and/or reach out to a qualified estate planning attorney for the fine-tuning.


1. Identify Who Will Manage Your Estate

When it comes to effective estate planning, having someone (or a few people) you trust to dedicate the time to effectively handle your estate is critical. They should be both trustworthy and dependable – not everyone fits both needs. These people may serve in multiple capacities such as executor/executrix, power of attorney, trustee, or as someone that will handle all initial responsibilities such as ensuring the will and letter of instruction make it into the right hands. 

For some people, identifying this person is easier said than done, but every action below is more or less dependent on having someone that will ensure your wishes are carried out. Identifying your trusted inner circle may be the most important step of all.

2. Draft an Initial Letter of Instruction

This is a letter that can be provided to the trustworthy people noted above upon your passing. In this letter, you will indicate:

  • Where you keep important documents such as your will, trusts, and statement of net worth that should include all bank and investment accounts, life insurances, and remaining debts.
  • Location of safe deposit box, keys, and contents (if applicable).
  • An inventory of household goods. This is particularly important for items of significant monetary or sentimental value. (Your wishes for these items need to be included in your will also.)
  • People to be contacted when you pass. Include the names and contact information for your family members and friends that you want to be notified.
  • You may also include the name and contact information of your executor, trustee, CPA, attorney, and financial advisor.

3. Keep Your Last Will & Testament Up to Date

Your will dictates what happens to all assets without a beneficiary or transfer-on-death (TOD) designation such as your home, vehicles, bank accounts, non-TOD brokerages accounts, household valuables, sentimental items and more. It will also dictate who is to care for any dependents you may have.

I see as many wills that are drastically out of date as I do people without a will. If you have had any significant life changes since your last will was written, it should probably be updated. Life changes could include:

  • Moving to a new state.
  • Marriage.
  • Divorce.
  • Sale or purchase of various properties.
  • The death of anyone included in your will.
  • The birth of anyone that should be included.

Your will must account for your children’s lives as well if, presumably, they are the primary inheritors of your estate.

  • You may want to protect the inheritance from your children’s spouses. This day and age, we know that divorce is unfortunately common; but if you have not planned properly, your child’s spouse could end up being a significant benefactor.
  • Do you have any special needs children or grandchildren that you want to ensure proper health and financial support?
    • If you have someone that you would like to provide for that has special needs, it would be best to seek out an attorney that specializes in that area of law.

4. Keeping Beneficiaries Up to Date

Make sure your beneficiaries are up to date on all life insurance policies and investment accounts. If you are intending to “stretch your IRAs” to future generations, your beneficiaries should be named specifically rather than a trust (unless it is a look-through trust) or passing through your estate. There are quite a few possible law changes floating around right now on the stretch IRA topic, but for now, it’s allowed. Take advantage of this great benefit.

If you plan to leave assets to charity, you may consider leaving Traditional IRA dollars to the charities, and Roth IRA assets and non-IRA assets to family/friends. This can offer significant tax savings. There are a lot of ins and outs to this process, so working with an experienced professional is critical.

5. Titling Assets in Trust

If you have a trust of any kind, make sure that everything has been properly transferred into the trust. This is the critical follow-up action needed after establishing a trust. Assets that are not titled properly will likely go through the probate process, which would make the creation of the trust a waste of time and money.

6. Gifting Assets During Your Life

If it’s unlikely that you’ll end up spending the assets you’ve accumulated, consider taking advantage of annual gifting strategies to those you love or charities. You may find you enjoy the act of giving during your life rather than waiting to pass it on later. It should be noted that there are some significant benefits to “waiting” such as a step-up in basis, but in this case, I’m simply referring to the enjoyment you may receive by giving now rather than later. If you’re doing your homework and working with qualified professionals, this might be a strategy to consider.

7. Prepare for Incapacity

This is never a fun thought, but can be critical for establishing how you wish to be cared for should it occur. You’ll likely want some/all of the following documents prepared and properly executed:

  • Power of Attorney (POA): A POA allows your designated person to make on-going financial decisions on your behalf if you’re unable.
  • Healthcare Proxy: This document will allow you to designate another person to make healthcare decisions on your behalf if you’re unable.
    • You may also want to include HIPAA release language in your healthcare proxy to ensure your designees will have access to pertinent medical records when making health-related decisions on your behalf.
  • Living Will: If you’d like a little more control than a healthcare proxy, you can establish a living will. This document allows you to specify the medical treatment you wish to receive and under what circumstances the treatment should or should not be administered if you’re unable to make those decisions.
  • Long-Term Care Policy: This is an insurance policy that can help offset expenses associated with needing “everyday living care” if you are unable to care for yourself. This type of policy can help preserve your estate to pass along to your loved ones.

The above documents are unique in that they each become irrelevant once you would pass away, but are extremely important should this unfortunate circumstance come about.

Bringing It All Together

It might go without saying, but I’ll say it anyway to be sure – these documents are worthless if nobody knows where they are or how to get them. Make sure that your “trusted few” know where your incapacity and estate planning documents are now and how to get them! If an instance arises when any of them become necessary, you’ll want your loved ones to have access to them. You may consider placing your incapacity documents and your letter of instruction in the same location.

To ensure your on-going privacy, one idea would be to place each document in a specially sealed envelope to be opened only when the specific situation arises and in a place where only the relevant parties know the location. This way, it will be easy to find when it is needed, but you can still maintain your desired privacy for when any single document becomes necessary.

Please note that I am not in any way an estate planning attorney, nor do I play one on the internet. Working with a qualified estate planning attorney should be step one in this process of putting your wishes in writing. There are plenty of supposed DIY “solutions”, but given what’s at stake, you should consider a more hands-on approach with a knowledgeable professional.

The goal of an effective estate plan is to make sure that your wishes are followed and to make estate dissolution as simple as possible for your loved ones. I hope this helps get the wheels turning!


This post is not advice. Please see additional disclosures.

Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.

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