With the new year starting, I thought it would be good to review and re-post my simplified checklist of the twenty-six items you can do to get your estate in order prior to death.
One of the greatest gifts you can leave your survivors is an organized estate. The time you spend now will help your loved ones to cope later with implementing your wishes. Here is a simplified checklist to help you get started on organizing your estate, and depending on your individual situation, you might discover other items to be addressed. It's a good idea to discuss your plans with your loved ones and the executor of your will. You will also want to consult with your legal, financial and tax advisers. The check list assumes you reside in Texas.
- Make or update your will. A will allows you to determine what happens to your money and possessions when you die, and who becomes the guardian of your minor children. Otherwise, state laws and courts make those decisions for you.
2. Review pay on death accounts. Most forms used by financial institutions to establish financial accounts (whether checking, savings, money market, brokerage and certificate of deposit) contain blanks and options to designate beneficiaries of such account. These designations over ride provisions in your will which may materially impact your estate plan and federal estate tax situation. You need to review these designations with your attorney and tax advisers.
3. Make a living will. This document can speak for you by outlining the medical procedures you want taken if you become too ill to state your wishes yourself.
4. Create durable powers of attorney. These documents allow you to appoint someone to make decisions on your behalf if you become incapacitated. There are two types: one to deal with your personal, legal, and financial affairs, and another to deal with health-care decisions. Both are very important and may keep your loved ones from having to go through an expensive guardianship proceeding.
5. Create a letter of instruction. This document provides a list of instructions for your survivors to follow. For example, it can spell out funeral wishes, people to contact and where your will and other key papers can be found. It also can provide information about your financial accounts and activities.
6. Calculate your net worth, including life insurance proceeds. Every person with a material estate should prepare and keep with their will a personal financial statement of all of their assets and liabilities. If you have a substantial net worth, consider talking to a tax or financial adviser to determine steps necessary to minimize or eliminate the impact of federal and state estate taxes.
7. Establish a trust if appropriate. A trust is a legal entity that holds property designated by you for the benefit of you and your beneficiaries. For example, you might need to set up a trust if you name minor children as your life insurance beneficiaries (legally they are too young to receive proceeds directly) or if you own real property in another state or country.
8. Consider funeral pre-planning. Pre-planning can relieve stress on your survivors and give you control over the ultimate cost of your funeral. If you are a U.S. military veteran, you may want military honors at your service. Contact your local funeral home or military installation to check on eligibility and availability.
9. Arrange for the orderly transfer of businesses. Business owners should predetermine what will happen to their businesses and their business assets through legal agreements and life insurance on business shareholders, partners and members.
- Buy or update your life insurance. Life insurance provides an immediate source of cash that is exempt from federal and state income tax (but, in general, not estate taxes). It is important to review your ownership, beneficiary and coverage amount every two or three years to make sure your policies still reflect your needs and wishes. Remember to discuss your beneficiary designations with your attorney, and coordinate the beneficiary designations with your estate plan.
2. Consider buying health/medical insurance. There are three major types of coverage that help protect and stretch your assets: Long-Term Care enables you to cover the cost of long-term health care in your home or at a long-term care facility; Major Medical protects you against the ever-rising cost of medical care; and Disability helps protect your income if you no longer can work.
3. Review your qualified benefit plan's survivor benefits. This might be a plan offered through your employer or the military's Survivor Benefit Plan (SBP). SBP choices made at retirement can be changed if you divorce or marry. In addition, the government periodically offers open enrollment periods that enable the plan owner to make changes.
4. Review your IRAs, 401(k)s and other retirement plans for beneficiary arrangements and benefits. Just like life insurance and pay on death accounts, remember to disclosure your beneficiary designations with your attorney, and coordinate the beneficiary designations with your estate plan.
ORGANIZING FINANCIAL RECORDS
NOTE: If you store any of the following information on your computer, tablet, and/or smart phone, make a list of all user names and passwords; inform trusted designees where any information is stored and where the information is to be found.
- Create a list of financial accounts. List account numbers and pertinent information about your investments, bank accounts, insurance policies (life, disability, homeowners, credit and life) and other financial matters.
2. List the location of valuable documents and tax records. Your list should include the location of deeds, car titles, military records, birth and marriage certificates, divorce decrees, estate planning documents and tax records.
3. List your personal data. This can include your Social Security number, driver's license number, VA claim number, your date of birth and the names and phone numbers of family members.
4. Arrange for access to your safe-deposit box. If you have a safe deposit box which contains your original will and/or powers of attorney, please make sure your spouse, executor and/or trusted designee knows such original documents are located in such box, and where the key can be found. Make sure copies of your will and other important documents are available outside of your safe-deposit box.
5. List all auto pay/draft and loan payments. This listing should include information about all of your credit cards, mortgages, consumer loans, auto loans, personal loans, and automatic draft or payment of re-occurring liabilities.
6. List other income sources and government benefits. This includes pensions, annuities, and Social Security. For information on military benefits, check with the Veteran's Administration or your nearest military installation's casualty assistance office.
7. Verify account ownership and life insurance beneficiary designations. Check financial accounts and insurance policies to make sure these conform to your estate planning arrangements.
8. List all organizations in which you have membership. They may provide special death benefits and should be noted for your survivors.
9. Lists of all social media accounts. This listing should include web addresses, user names and passwords.
- Provide a trusted family member or friend with the location of confidential or valuable items you may have put away for safekeeping.
2. Provide a family member or friend with the location of spare keys and security codes.
3. Provide easy access to your will and your durable powers of attorney. Keep signed, original copies of your wills and durable powers of attorney in a fireproof safe or file cabinet at home, or in a safety deposit box.
4. Provide the name of your veterinarian and care instructions for pets, if appropriate.