It is summertime in Traverse City. The sun is blazing, the water is warming up, and like clockwork, members of your family are at your doorstep. With all of them within earshot, now might just be the perfect moment to bring up the importance of estate planning. Try to ignore their groans when you raise the topic in the middle of your family picnic
Estate planning often carries the connotation as something that’s only for the wealthy. That’s dead wrong. After all, estate planning is just about making sure you’ve got all your affairs in order. Your wealth is irrelevant. Simply put, everyone needs an estate plan.
While you’re still alive, you need to have two legal documents to cover the possibility of your absence or inability to act on your own. One focuses on your money matters and another guides your health care decisions. On the money side, you designate a person willing to act as your “agent” in all of your financial affairs. For your health care needs, you name a person who will be your “patient advocate” in an emergency medical situation. Both of these are referred to as a Durable Power of Attorney.
In addition, upon your death you also need to provide clear direction for the distribution of your money and property and the possible need to make arrangements for the care of certain loved ones.
The first task in your estate planning journey is to carefully name your beneficiaries of your assets. For some assets, like retirement accounts and insurance policies, most people know to name specific beneficiaries. It’s a bit less known that you also can do the same for your non-retirement investment accounts and bank accounts. That’s even true for your real estate holdings, too. Now, there are often really good reasons to not name beneficiaries for each and every one of your assets. It’s important to meet with an experienced attorney to make sure you think through all the unique angles of your life.
Next up in your estate plan is to have a Last Will. This basic estate planning document plays multiple roles. At its heart, a Last Will names a “personal representative” to help divvy up your material stuff and it lays out who gets what if you failed to name an explicit beneficiary for an asset or account. On top of that, this document also is the spot you designate a “guardian” to care for your minor children or pets.
With these four steps complete – that is, your two Durable Powers of Attorney, your beneficiary setup and your Last Will – you could have everything nicely covered.
On a final note, people often ask whether or not they need a trust. Nowadays, many people don’t, but some absolutely do. Naturally, you should call an attorney to find out more. It’s money and time well spent.
Jason P. Tank, CFA, CFP® is both the owner of Front Street Wealth Management, a purely fee-only advisory firm and the founder of the Money Series, a non-profit program committed to providing open-access to financial education, for all. Contact him at (231) 947-3775, by email at [email protected] and at www.FrontStreet.com