Why future planning is important, and where to start
According to recent reports from a senior living referral service, Caring.com, 67 percent of Americans die without a valid estate plan, meaning that their assets, and end-of-life wishes, are distributed and upheld according to intestate succession laws.
These laws establish the order of distribution of one’s assets – first to a surviving spouse or children, then to close relatives, and if there are no surviving relatives, the assets are given to the state.
Proper future planning is important for everyone, regardless of age or net worth. Without a will, power of attorney, and other documentation, loved ones are met with complications and potential conflict during an already difficult time. Let’s review the estate planning process, who can benefit from this type of planning, and where to start.
Everyone needs a plan, regardless of net worth
People partake in estate planning for various reasons. Whether it’s to ensure financial stability for a spouse or minor children, to fund a family member’s education, to support a charitable cause, or to ensure the safety of beloved pets, all reasons for planning are valid.
“Absolutely everyone should partake in estate planning, regardless of your net worth or age,” says Brad Johannes, Empeople’s VP of wealth management. “When you think about your loved ones, having a plan is imperative. Don’t make the mistake of thinking future planning is only for the ultra-wealthy.”
While many think of estate planning as a step one takes to share their wishes in the matter of death, estate planning is also used in the event of incapacitation. Accidents, critical illness, and cancers can occur at any stage in life. Why not be prepared before hardship strikes?
Estate planning as an extension of retirement planning
While estate planning is a process in its own right, it should also be thought of as an extension of retirement planning. Again, whether you’ve just started your first job, or have been in the workforce for 20 years, retirement planning and future planning are important for everyone.
Estate planners and financial advisors are equipped to assist you with future planning. They help you make decisions regarding how your assets will be preserved, managed and distributed upon death or incapacitation.
Your advisor can assist you with the following:
- Taking inventory of your assets and debts
- Writing your will
- Predetermining the settlement of estate taxes and debts*
- Setting up trusts
- Making charitable donations to limit estate taxes*
- Naming an executor and beneficiaries; and
- Setting up funeral arrangements
Remember, future planning isn’t just for high-net-worth individuals. If you have assets such as a house, vehicle, stocks, art, collectibles, life insurance, pensions, or debt, you’ll need an estate plan.
Planning with your loved ones in mind
One of the best ways to take care of your loved ones is by completing an estate plan. When you write your will, you outline clear instructions about the succession of real estate and guardianship of living dependents such as children and pets.
You’ll also select an executor to oversee the compliance of your will, and name beneficiary designations for life insurance proceeds and retirement account disbursements. Your designated durable power of attorney (POA) will help direct other assets and investments outlined in your estate plan documents.
Assigning these important roles can mitigate confusion, conflict, and stress during an already difficult time. Aside from reducing additional emotional distress, you will be helping your family by limiting federal estate tax and gift tax, which your loved ones may not be prepared to pay.*
Additionally, estate planning includes setting up funeral arrangements. You may opt to pay for your funeral in advance, and relieve your family of other difficult decisions.
How to get started
Before you meet with your financial planner or estate planner, make a list of all your assets and debts. Be sure to include the following items:
- Real estate
- Sentimental items (heirlooms, jewelry, collectables and artwork)
- Credit union or bank account info
- Insurance policies
- Investments, stocks and bonds
- Annuities
- Loans (mortgage, HELOC, auto, student, personal, credit cards, etc.)
Once you’ve gathered and organized the above list, print and make copies for your beneficiaries. At this time, it’s also a wise idea to review the beneficiaries on your retirement, insurance and annuity accounts, ensuring the beneficiary contact information is up-to-date.
Now, you’re ready to contact your financial advisor or estate planner. They’ll help you set up joint accounts – which help your loved ones bypass the probate process – and transfer on death designations – allowing a designated person to take over your account after you pass away, again bypassing probate.
They’ll also assist you in choosing an estate administrator, a person responsible for taking care of your financial matters after you pass. While your initial reaction may be to select a spouse, they may not be in the right headspace to take over such responsibilities.
Financial advisors understand it can be difficult to broach estate planning conversations with family members, often leading to ignoring the process altogether. Empeople offers family wealth meetings to facilitate the conversation with your loved ones.
It can be helpful for loved ones to see that future planning is an act of care. Ensuring that you’re taking advantage of tax-exempt opportunities and outlining beneficiaries and estate administrators will ease both a financial and emotional burden during a difficult time.*
Contact an Empeople financial advisor today to inquire about estate planning. We’ll start with a full wealth transfer analysis and implementation plan so you can confidently plan for your financial future.
*Tax laws are subject to change. Contact a tax advisor for more details.
