The state of your estate

Estate Planning. You may know the term, and some may even have an estate plan in place, but what is it really? What does it mean to have a plan for your estate? Isn’t estate planning only for the super rich? Or is it? In this article we will answer those and many more questions about estate planning, and while there is a lot of information here, there is still even more to be known. Hopefully this article can give you a clear picture of what an estate plan is and why you would need to take action.

I am a Financial Advisor, not an estate planning attorney, and all the experience in the world is no substitute for someone who practices estate planning law on a daily basis and with that in mind I have consulted Laura L. Noble, an estate planning attorney in Bay Village, for some help. If you need more information or to see how this article applies to your specific situation, be sure to contact an estate planning professional.

Who needs an estate plan?

That is perhaps the easiest question to answer. You need an estate plan if you are ever going to die or become incapacitated. So unless you will never pass away or become incapacitated, you will need an estate plan.

How do I plan for my estate?

The good news on this question is that you already have an estate plan whether you know it or not! Probate is a judicial process for managing your assets if you become incapacitated and for transferring your assets in an orderly fashion when you die. So if you do not create a plan for yourself, the State of Ohio through the Probate Court has established one for you. However, the simple question is whether you want to decide who will your receive assets when you pass, or who will manage your financial and medical affairs if you become disabled or incapacitated; or would you prefer the courts to make those decisions for you.

You may be considering a “do-it-yourself” estate plan or utilizing online legal sites where they provide the documents for you and you fill them out and do the filing of the forms etc. This can be tempting, but may not be the wisest choice.

When I asked Laura Noble why someone should utilize an attorney, she responded: “In a word – counsel. An estate attorney provides you the counsel needed to be sure that your wishes are met, something a ‘do-it-yourself’ or online site can not offer. The documents are only one piece of the planning; they are only as effective as they accurately reflect your goals and your personal circumstances.”

What steps do I take?

Now that we know that all of us need an estate plan in some form, you may be wondering what steps you can take to effectively plan your estate. I have broken the process down into 6 steps:

Step 1: Identify your financial and family goals

Step One requires you to face some decisions that is likely the very reason you have not explored estate planning up to this point. Who wants to think about their death or incapacitation? Not too long ago my wife and I were discussing our estate plan, and, like you, we really are not excited about discussing the subject matter. But with four children it is vital, and it brought something very important to mind: if it is difficult for you to think of who you would want to raise your children or manage your assets if you were to pass, imagine how much harder that decision is for a judge who doesn’t even know you.

If you pass without a plan and Probate is making your decisions for you then that is exactly what will happen. This is not intended to scare you, but please realize the seriousness of the topic; it does matter. So step one is identifying what your and, if applicable, your family's financial goals and rules are for your heirs, including medical decisions, who will manage your financial affairs if you are not able to, and who will be take over your responsibilities if needed.

Step 2: Gather necessary information

To plan for the future you need to know where you are today. Gather all of your financial and insurance information. There are several tools online that offer helpful lists of items to gather and review.

Step 3: Evaluate estate planning tools

This step is where the misconception that estate planning is only for the rich comes from. There are incredibly complex estate planning tools available, where you can direct your assets to do so many different things it can be easily confusing. All of the estate planning tools available may not be right for you, and just because you may hear of or read an article about a great planning technique it may not be right for you. This step inevitably leads into Step Four.

Step 4: Work with an attorney

As previously stated, working with an estate planning attorney will provide you the counsel you need to ensure your wishes are carried through when you pass or become incapacitated. Laura noted, “Not only will an estate attorney help you with the documents, but the consultation and advice will ensure that your documents help you achieve your personal planning goals. As well, they can help you and your heirs implement the plan when that time comes.” Working with an estate planning professional is vital to your success.

Step 5: Implement your plan

At this point you have the right to feel good about what you have done. You have taken several steps in ensuring that your estate is handled, your spouse is cared for and your heirs are protected in the manner in which you so desire. Depending on your individual needs you may be performing several actions here to ensure the plan will operate properly under advisement of your attorney. Do not delay these actions as the will alone to do something does not mean they are done.

Step 6: Review your plan regularly

Once your plan has been implemented it is important to review it on a regular basis to ensure your current wishes are still being met through the plan. Laura Noble recommended that you review your plan every three to five years to consider the impact of any changes in your personal circumstances, such as the birth of a child, retirement, divorce, or significant changes in your net worth and/or the tax laws.

Who needs to know?

Once you have established your estate plan, a common question is: Who needs to know? First, if you use the default plan and your estate goes through Probate, you should know is that everything is made public record. If your assets and your estate are something you would rather keep out of the public eye, then an estate plan is important.

From there it is important that your family knows that you have an estate plan and where those documents are in case of an event leading to your passing or incapacitation. You may not want to, and certainly you do not have to, review the details of the plan with your family.

This is another vital area where your estate planning professional can provide assistance. For example, Laura Noble said, “parents may not feel comfortable revealing the specific details of their estate plan with their heirs; however, simply letting family members know that a plan is in place may be helpful. It is also important to make sure that the individuals responsible for managing your affairs, such as an 'agent' or 'Power of Attorney,' executor, and trustee understand their roles.”

I hope that this article has helped you understand the importance of estate planning, and why you should consider and implement a plan sooner rather than later. It boils down to who you want making the decisions: you or the courts. This article is truly the tip of the proverbial iceberg in estate planning, but my wish is that it leads you to seriously consider what if any estate planning needs you may have. Planning for your estate is certainly not only for the rich, but rather, as Laura Noble said, “If you love somebody and you own something chances are you need an estate plan.”

Laura Noble is an Estate & Legacy Planning Attorney in Bay Village. Mark Zagrocki is a Financial Advisor and Chartered Retirement Planning Counselor in Westlake.

Wells Fargo Advisors did not assist in the preparation of this report, and its accuracy and completeness is not guaranteed. The opinions expressed in this report are those of the author and are not necessarily those of Wells Fargo Advisors or its affiliates. The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Wells Fargo Advisors, LLC, Member SIPC. 

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Volume 1, Issue 8, Posted 8:36 AM, 12.03.2009