When I think about estate planning, my primary motivation is simple: I want to make things easier for my loved ones. Having planning done in advance can help heirs avoid complex legal and financial matters during a time of grief. Through this planning, family can focus on healing rather than logistics.
What Is Estate Planning?
Estate planning is the process of deciding what will happen to your money, property, and personal belongings when you pass away or if you become unable to make decisions for yourself. It is also about having a plan for how your assets will best be used to help your loved ones when you’re gone – and avoid unnecessary headaches.
The best way I’ve found to start estate planning is to picture what things would look like to my family if I didn’t make it home from work one day. Going a step further, what if my wife and I were to pass together in an accident. What steps can I take to make things easier for my heirs?
Action Steps
Estate planning is easy to put off so let’s break it down to small steps you can get started on today.
Beneficiary Designations – This is an easy one. Take inventory of all your financial accounts plus any life insurance policies and double-check the beneficiary designations. Here is a list of accounts to check:
- Current 401k or equivalent
- Old 401k accounts
- IRAs
- Bank accounts – you may need to visit your bank to get a beneficiary designated
- Brokerage or investment accounts – you should have a “Transfer on Death” or “Payable on Death” designation on these accounts.
- Life Insurance policies including policies through work
If you are married, your spouse is usually the first “primary” beneficiary, but make sure you have contingent beneficiaries set up as well.
The bank account is one of the most missed accounts. This one can be important since it would give survivors immediate access to needed cash. Having a joint account with a spouse is not enough.
If you own real estate, you may also be able to name a beneficiary. For instance, in five states (including our home state of Michigan) a Lady Bird deed allows you to pass real estate to your heirs without going through probate. As with other more advanced estate planning tools, this should be done only with the guidance of an experienced estate planning attorney.
Create a Will or Trust – This is the foundation of an estate plan. These documents can outline how you want your assets distributed after your death, names a guardian for your children, and appoints an executor or oversee the distribution process. There are simple templates online to create a will, but hiring an experienced attorney will ensure you don’t miss anything.
Regarding creating a trust vs a will, there are a few reasons to have a trust, but many people will be fine with just a simple will. Here are some of the reasons to have a trust:
- Minor children
- Special needs children
- Second marriages
- Large or complex estates
- Probate avoidance – this keeps things private
- To shield assets from the spouse of your child or children
If you’re not sure or have questions, see an estate planning attorney.
Create Durable Powers of Attorney – You need to name a person (or people) who you trust to make financial and medical decisions on your behalf if you become incapable of doing so on your own. Make sure they are aware of and accept this appointment. Just like a will, there are templates available, but it is usually worth it to have the professional guidance of an estate planning attorney.
Letter of Last Instruction – We wrote an article about this a few years ago - you can find it here. Although this isn’t a legal document, it can play an important role in reducing stress and decision making for your loved ones during a time of grief. Completing this document can have a large positive impact for a small investment of time.
Review and Update Regularly
Life changes, and so should your estate plan. Major events—like marriage, death of a beneficiary, divorce, the birth of a child, or the purchase of a new home—might require updates to your plan. Aim to review your plan every few years or after big life events.
Estate planning doesn’t have to be overwhelming. Start small—write down your goals, talk to trusted professionals, and take it step by step. The peace of mind you’ll gain is worth it, and your family will thank you for being prepared.
All my best,
Ken
