Although estate planning is one of the key areas of planning, many pilots come to us with no estate plan or an estate plan that hasn’t been reviewed in years, and in some cases decades. Why is it that we often find estate planning neglected? I believe it is because the process of estate planning forces us to focus on our death and its impact on those we love. Topics that most of us don’t enjoy addressing. Topics that are easy to put off because unless one is terminally ill and no one believes their death is imminent.
The lack of situational awareness that we see is that most people don’t truly understand what will happen to their estate after they pass away. Who will get what? How will those assets transfer? Are those assets at unnecessary risk? How much will estate settlement cost? How much tax will be due? How long will the settlement process take? Is there sufficient liquidity to settle the estate?
In general, you should consider reviewing your estate plan every five years, when your goals change, or if a change in law warrants another look. Here are the areas on which you will want to focus.
- Who are the important people in my plan? Executors, powers of attorney, trustees, guardians, etc. Do they want to serve? Do they know they are part of your plan?
- Who do I want to have my assets? Should different heirs receive different types of assets?
- Should those assets be protected for some reason? Age of heir, financial responsibility of heir, potential divorce of heir, future marriage of surviving spouse, etc.
- If in a second marriage, will all of my assets be available for my spouse?
- Should I put provisions in place to avoid or minimize probate?
- How do I minimize potential federal or state inheritance or estate taxes?
- How do I handle property located in a different state than my state of residence?
- How do I make the process of distributing my estate as easy as possible for my loved ones?
Now that you have better situational awareness, it’s time to take action. Here are your next steps:
- Establish goals for your estate plan.
- Identify important people.
- Create an outline of your plan.
- Have legal documents created or modified.
- Coordinate titling and beneficiary designations.
- Establish physical and virtual record keeping location(s).
- Write Letter to My Family.
- Communicate plan with important people.
Once complete, create two reminders: First, thoroughly review your plan in 5 years. Second, annual reminders to consider whether or not your goals have changed and to review your titling and beneficiary designations. The key to making progress toward your financial goals is to have a defined process that provides a high level of situational awareness along with structure and checklists to help make sure you don’t miss anything – especially the unknown unknowns. Let us know if we can help.
This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation.