I’m not a dummy, so I avoid that aisle of the bookstore. You should, too. Let’s concentrate on what really smart people would do instead.
If you’re an exceptionally brilliant person who just happens to know less than you should about estate planning, I’ve written this piece for you.
Estate planning is a complicated field, but at a basic level there are only a few important items to understand. Luckily, understanding estate planning is like building a house: once you grasp the foundation, it’ll be easy to construct a manor later.
…and yes, I am in fact a ninja with similes.
In your will, write “I leave it all to AverageJoe.”
Okay, since you didn’t bite on that dubious advice, I’ll focus on some better tips: when you’re planning your estate, start with a basic document called a will.
If you’re estate is large or convoluted, you may need to gravitate toward more complex documents such as a trust, but you’ll still have a will as the base of your estate plan.
In short, a will is the basic block that everyone will need.
Here’s what you’ll accomplish in your will: you’ll determine where your belongings will go and how they’ll be divided. If you want to also control when they’re divided, you’ll need more complex documents (or a will which converts to a more complex document upon your demise).
In your will you’ll appoint a person to oversee the process. This person is often called the executor of your will.
Some practical advice: try to avoid naming two individuals. People fight about weird stuff when a loved one passes away. If you leave two people in charge equally, you’re asking for them to both fight for your interest. I’d rather you chose one single person who’s very comfortable being seen as “a jerk.”
Usually when I make that recommendation people’s mind springs directly to a specific person. Did yours?
What If I’m Sick and I Can’t Communicate With Medical Pros?
Hmmm…..this one’s a problem. Luckily, there’s an easy solution.
Here’s what we’ll do: We’ll throw into your estate planning package (doesn’t that sound official?) a document often called a Health Care Power of Attorney.
You may have heard the old story about “pulling the plug.” It used to be that you could just write down your wishes on a notarized piece of scrap paper and the doctor would follow it.
Today, that document, often referred to as a living will, isn’t recognized by many doctors and also isn’t legally binding in many states. Instead, you now nominate someone ahead of time to communicate on your behalf with doctor plug-puller.
Who would want that responsibility?
I certainly wouldn’t want the life-long psychotherapy I’ll need after deciding to pull the plug on my mother (not that I haven’t thought about it a time or two….but anger is fleeting, love is strong).
Here’s how you handle this: in the Health Care Power of Attorney, you’ll write down your wishes regarding end of life scenarios. That way, your nominated person will only be following your orders, not deciding what to do in the moment.
I told you this wasn’t difficult. In a kind-of-sick way, it’s fun. Let’s move on.
Who Will Manage My Vast Fortune I Haven’t Built Yet, But Will Someday?
You’ll also need someone to sort through your financial picture if you’re still alive, but unable to communicate or make decisions. For this, you’ll add a document called a Power of Attorney document.
In most cases, this is a springing power, meaning that it’s worthless until you’re incapacitated. You won’t have to worry about junior emptying your bank account the moment you make him your representative.
When it comes to both health care and financial powers of attorney, choose someone your age or younger. There’s a more-than-likely chance you’ll forget about these documents about 32 seconds after you’ve finished. You don’t want your power of attorney to pass away before you do.
On that note, consider a contingent power of attorney to back up your primary choice, in case your nominee can’t serve your wishes.
What About a Trust?
Trusts are important for more complex estates. Some bloggers with estate planning experience aren’t fans of trusts. Others live by them.
I’ll be blunt about trusts: I’ve seen more trust work done that was worthless than trusts which actually made sense. In many cases, there was only one reason for this: the attorney could bill more hours preparing a huge trust instead of a tiny will document.
There are good reasons you may decide a trust is for you:
- you have children by two different spouses,
- your net worth is well above $1M dollars (some estate attorneys will say above $5M is a better number),
- you have specific charitable intentions,
- there are business interests involved in your estate,
- you have specific time frame wishes to dole cash out over longer periods or with specific caveats, and
- You’re worried about privacy in your estate
Who Takes Care of My Beautiful Children?
Assuming you have children, you’ll choose a guardian in your will.
Many people have a will specifically for this reason. If you die intestate (that means without a will), the laws in your state will govern who cares for your children when you die. You’ve seen the mess they’ve made of our roads….imagine what they’ll do with your kids!
Should I Hire Someone Or Use A Kit?
This one is easy. A kit is FAR cheaper, but I’d hire an attorney every time.
Maybe you’re a whiz kid at estate planning. Good for you.
I’ve worked with families that have to clean up the mess left by an uber-guru such as yourself, and wading through your accounts isn’t pretty without professional help. If you work with an attorney, consider this to be your chance to pre-interviewing the person your family is 90 percent likely to deal with once you pass away.
Is this a more expensive approach? Heck yeah.
Will the lawyer’s will look suspiciously like the one in the will kit? In many cases, yup.
All of this is irrelevant. We’re talking about your children, your stuff, your healthcare. Do it right.
Such great advice – and some that I give on a daily basis but haven’t followed myself. Why am I such a slacker??
It’s crazy how many people die without a will considering how easy (and cheap) they are to get created.
We don’t have children or a lot of valuables, so I don’t know if I NEED a will. However, we definitely need to get the Financial DPOA, HC DPOA, and the health care proxy.
Thanks for the reminder!
Average Joe says
When I think slacker, Jason, your name definitely doesn’t come up. Let’s just say that you knew you weren’t going to die yet, so you waited….
I’ll tell you something funny (well, kinda funny)…I can’t BELIEVE how awesome I felt when my estate plan was finished. I told my wife that I was blown away by the huge weight that was lifted off my shoulders that I’d never known was even there.
I’m with you on not “needing the will.” Definitely agree on the ancillary documents and checking your beneficiaries on retirement plans & insurances….
I really dislike tattoos. I have, however, considered getting one large tattoo on my chest:
D N R
Average Joe says
Ha! That’s awesome, Joe (great name, btw). They’re sure to catch that one. By the way, we’re having fun with your post here today. You certainly know how to stir the pot…enjoying your site.
interesting blog.. I take your advice.I’m planning to do my will.
Eric Ledbetter says
Smart people who’ve worked hard all of their lives to achieve financial success often make dumb estate planning mistakes. Those mistakes can result in their families losing over half of their assets when they pass between generations. They can destroy much of a lifetime’s work. And they can inflict a great deal of pain and heartache to the people they love.
Christine Smith says
Agree with you. Financial planning and estate planning are 2 different things and it requires more experience because people invest almost 90% of their savings in building estates. A little mistake there, can cause a great loss which will be almost impossible to recover.
Average Joe says
Thanks, Christine! Most people have trouble doing estate planning, and it’s SO important…..
Moses & Moses says
I would go with the attorney every time as well. The kit may be less expensive but I feel like the advice offered by an attorney when dealing with this kind of thing is well worth the extra cost.
Damaris Bits says
Firstly, Thank you, I just started a law degree and your article just made sense to me in every aspect. I needed re-assurance that its all going to be fine if i just keep working at it. It felt like everyone had began the race and i was still at the starting line- getting my ducks in a row. You literally just saved my life.. Awesome Article!
Johnny Shi says
I have also had the question of “who will manage my vast fortune I haven’t built yet, but will someday”. This post has been really helpful. I think it is important to plan ahead. Finding and appointing people to handle these decisions is important. Thanks for sharing.
manish hingar says
Ya! Great post … Will..If you are not much illiterate about financial things this blog is awesome for you if you read this article and implement on same you can save time plus money
William Lyons says
For some, estate planning means hiring an attorney, paying for complicated documents which, too often, focus on tax issues, and calling it a day. From my vantage point, that approach turns what matters upside down.
For me, estate planning starts with deep thinking about what does and doesn’t matter. Who will take care of the kids? Will there be enough money? When will the money get distributed? To whom, and in what amounts? What about the business? Etc.
Documents count, for sure. However, for many people simple documents work very well. Achieving outcomes really depends on asset titling, being organized, and communicating with those people who will look after your estate when you’re gone.
Joanne Mahoney says
Good article. Amazing how many individuals do not plan for the future. I believe that some individuals find it uncomfortable dealing with death and sickness, so they avoid it. Unfortunately, it can be very hard on loved ones left behind when there is not a strategy in place.
Michael Haslam says
A comprehensive estate plan can accomplish many goals, such as providing for survivors, ensuring your children are cared for, determining the flow of your assets upon your death, and reducing the amount of taxes your estate will pay while administering your estate.
Thanks for sharing this post.
Keep doing this great work.
Joseph Blanchard says
Hey, Great Share.
Someone who is planning for his golden years, holding a proper attorney at hand can present things easier for him, especially when the time comes when you have no longer nearby to specifically entrust and indicate your properties and assets.
This can also support your family, especially your children, during your absence and their vulnerability.
Rosie Taylor says
You have shared a great post.
Estate planning involves legal matters and the best people who can do it effectively are the ones who have the necessary qualifications to make it happen.
Estate planning and financial planning have many of the same concerns, including income-tax planning, investment planning, insurance planning, and retirement planning.
It is always good to do estate planning while your wits are still intact. A mentally incapable person can no longer execute a will or estate plan.
Thanks for sharing!
John R. McDonald says
Hey Buddy !!!!!
Estate planning is important for the continuity of your assets and your loved ones’ well-being after you die. There are lots of dreadfulness out there about ownership issues and family disagreements over wealth that was not delegated before a loved one’s passing. You will want to make sure that your estate is planned for and that your wealth, no matter how small, is distributed as you want it to be upon your death. The article tells about the wills and trusts.
Thanks for sharing and Keep Sharing!!!!!!