After having an amazing Christmas, January is a time to make resolutions to do things better in the new year and to provide you with peace of mind.
Here are five resolutions to make to ensure your estate plan is where it should be in 2022.
- Resolve to Have an Estate Plan
I meet many clients who do not have a Will, Power of Attorney, or any other estate planning documents that they know they should have. They have just put off this task – maybe because they they they are too young, it’s too expensive, it’s too morbid to think about, they don’t have anything to pass on, they assume that spouse and kids get everything or they have just not got round to it yet … whatever the reason it’s time to get organised, get your paperwork together and finally get your will written.
If you have written a will or other estate planning documents then perhaps it’s time to review your instructions? Additions or losses of family members, new asset acquisitions, a move overseas, the maturity of children are some of the reasons that you should review your existing instructions.
At least consider writing your will.
- Resolve to Get it Done Right
Making sure your assets go where you want them to go at your death, managing them properly for young beneficiaries, protecting assets for your family, avoiding delays and costs in probate, and saving your beneficiaries as much income and estate tax as possible are important steps.
It is important to understand that the way you carry out your estate plan has a significant impact on your family or other heirs – either positively or negatively. When steps are missed, it can take a long time for your loved ones to receive your assets, resulting in unnecessary delays. Some beneficiaries could miss out or unwitting heirs could inherit. Home mortgages can be repossessed, education fees stopped, and lifestyles substantially altered … By having the right documents in place, your demise can be about the missing person, not about rebuilding lives.
You may be tempted to draft your own Will or other legal documents, but that is not a wise strategy. In my 35 years of experience, I have never seen a Will drafted by a client that will function as intended and that will not cause more problems than it solves (missed beneficiaries, wrong beneficiaries, unclaimed assets, etc.).
Get it done right, and you will have the peace of mind that crossing this task off your list of New Year’s Resolutions will bring.
- Resolve to make sure your Beneficiary Designations are Up to Date
Many of your most significant assets – life insurance, retirement plans/accounts, annuities – will be paid to a designated beneficiary at your death as long as you have nominated them, and kept the instructions updated.
Properly designating these beneficiaries is more complicated than it may appear. Understanding the implications of certain beneficiary designations is crucial.
This can be especially significant in estate planning for a minor or disabled child. A trust for the benefit of a young or disabled beneficiary can be instrumental in avoiding a lengthy and costly court proceeding to appoint a guardian and in avoiding the loss of public benefits a disabled beneficiary may be receiving.
One regular mistake made by many people is to nominate a beneficiary to a life insurance plan but name another in their will. The life insurance nomination takes precedence in this case.
Understanding how distributions from retirement accounts work after the death of the account owner, and how different beneficiary designations will impact the size, frequency and income tax payable on those distributions is crucial to making appropriate designations.
Having the proper advice in place can ensure that the right assets go to the right people, and understand the amount so that your loved ones can also plan.
- Resolve to have Incapacitation documents in Place
Much of the estate planning you do is for the benefit of your family or other heirs and will never impact you as they relate to your death.
Creating a power of attorney document that reflects your wishes financially and (separately) medically is one area of estate planning that will directly and significantly impact you if you experience mental incapacitation prior to death.
Many people deliberate over this document more than their will as the “attorney” you appoint is someone that would look after your finances and/or health care decisions (you can have separate attorneys) whilst you are still alive, but no longer able to act on your own.
As your Next of Kin will be powerless without a Power of Attorney if you become mentally incapacitated, could you perhaps argue that this document is more important than your will given that we are all 4 x more likely to become critically ill before we die?
- Resolve to Make Sure People You Care About Have a Plan Too.
Estate Planning is important for anyone over the age of 18. College-aged children and elderly parents should have powers of attorney and health care documents that will allow someone to make financial and health care decisions for them if they are ill or incapacitated.
Parents of young children should name guardians for their children and create a trust to manage assets for young beneficiaries to avoid a child receiving control of ALL inheritance at age 18 (you can dictate what age they can receive your hard-earned assets.)
Parents who will leave a significant inheritance to their children should consider asset protection planning to protect inherited assets from a child’s creditors, divorcing spouse, spendthrift activity etc …
Older couples or others with large estates can save their heir’s significant estate taxes in certain parts of the world with proper estate planning.
Elderly parents may want to plan to protect assets from long-term care liability – certain countries use your assets to pay for your elderly-care.
If a friend or a family member needs some inspiration to make estate planning a 2022 resolution, please share this article with them.
Happy New Year! and Happy Planning.