In our recent article titled “Everyone Needs an Estate Plan” we explained that no matter
how meager your assets may be, you still need to do some basic estate planning to
ensure your loved ones are taken care of. At a minimum, we pointed out that you need
a will, a patient advocate form and durable power of attorney. In addition to these basic
documents, there are a number of other things you can do that will make things easier
on your survivors.
If you have minor children, make sure you’ve given careful thought to who you want to
be their guardian, should something unforeseen happen to you (and your spouse, if you’
re married). You should discuss your wishes with the potential guardians, to make sure
they are prepared to take on that responsibility. You or may not want the same
individuals to be trustees of your estate.
Consider having a family meeting to discuss your estate plan. Take care to treat
beneficiaries fairly. It is not uncommon for conflicts between siblings to seemingly arise
from nowhere after a parent has passed on. Long-felt feelings that a sibling has been
“favored” are not unusual. Distribution of personal items can be particularly
problematic. Try to determine beforehand what is important to your beneficiaries so that
you can minimize problems.
If you’ve spent the time and money to create the basic estate planning documents
mentioned above, make sure you store them in a safe place. Let your heirs know where
to find them. And if you want to modify the documents, avoid handwriting
your changes on the documents. You should contact the professional who prepared the
documents to make sure your changes are prepared in a valid, legal manner. It is also
important to update your estate planning documents every three to five years or in case
some life changing event occurs (e.g., marriage, death, divorce, etc.).
Consider pre-planning and pre-paying for your funeral. Doing so can eliminate a lot of
stress for your loved ones. Include funeral documents with your other important estate
documents. If you don’t preplan your funeral, at a minimum, document your desires.
If you are married, make sure you have adequate life insurance in place to meet your
spouse’s and children’s needs. Some special circumstances also warrant coverage (i.
e. total and permanent disability). How much you need depends on a number of factors.
It is best to see a financial advisor who does not sell insurance to determine how much
life insurance you really need. Avoid buying life insurance as an investment. We
generally recommend low-cost term life insurance for our clients. Consider also
purchasing a long-term care policy. We will discuss long-term care policies in more
detail in a future article.
Check all your beneficiary designations to be sure they are current and appropriate.
Except in special circumstances, it is best to name individuals as beneficiaries of your
IRAs and 401(K)s. Trusts can be named as beneficiary of an IRA, however, if certain
trust features are not met, trust beneficiaries could lose the ability to spread distributions
out over their life expectancy.
Consider consolidating investment accounts and depositing any stock certificates you
are keeping in your safe deposit box or in that shoe box in the back of your closet, into
your consolidated taxable account. Account consolidation can save your heirs a lot of
time-consuming paperwork. Take care to document the cost basis for all of your taxable
investments. Currently, your assets will receive a step-up in basis when you die,
however, future estate tax rules are uncertain and may change significantly in 2011 due
to expiration of current estate tax law.
Finally, if you are married, make sure your spouse has a good understanding of your
business affairs. Both spouses should be involved in all aspects of your financial affairs.
Estate planning can be quite complex. For most people, however, there are many
things you can do to make things easier on your survivors. Hopefully our two articles on
estate planning will get you started on the right path.
David C. Patterson, CFP® and Erin Patterson, CFP® are the owners of Patterson Advisors, LLC, a fee-
for-service-only financial advisory firm. Patterson Advisors, LLC is a Registered Investment Advisor,
registered with the State of Michigan, helping clients in Waterford, Clarkston and Royal Oak, Michigan
as well as other Oakland County, Michigan communities . Visit www.pattersonadvisorsllc.com for more
information or call 248-674-2108.
Published in the Oakland Insider, February, 2008,
Everyone Needs an Estate Plan - Part II
By David and Erin Patterson