The Beginner’s Guide to Estate Planning

If we have one mantra we repeat with our clients regarding estate planning, it’s this: If you don’t make a plan for your estate, someone else will – and you probably won’t like it. 

That “someone else” could be loved ones in the process of grieving, or even government entities. Take, for instance, Pablo Picasso. He created thousands of paintings and sculptures, owned five homes and had millions of dollars in cash and gold. The total assets were worth hundreds of millions, possibly landing somewhere in the billions in today’s money. Yet, he never had a will. 

Forbes reports that Picasso’s estate “took years and tens of millions of dollars” to settle – all of which could have been avoided through a simple will. Even today, many are arguing over the legality of using Picasso’s likeness, wondering what he would have wanted.

Picasso’s career is one to admire, certainly, but his estate planning was lacking. Luckily, it’s fairly easy to develop an estate plan and save your loved ones from navigating Picasso-esque dilemmas after you’re gone. 

In today’s blog, we’ll walk through the basics of estate planning, as well as tips to help you begin your long-term asset management journey.

What is Estate Planning?

Estate planning is the process of organizing and creating a plan for all your belongings in the case that you pass away or become otherwise incapacitated. Your estate plan could involve:

  • Legal documents
  • Accounts
  • Insurances
  • Pensions
  • Physical assets (like valuable artwork)
  • Real estate and more 

Building out your estate plan usually involves both estate planning attorneys and financial advisors. Although both professionals can work together to create your unique plan, they actually have very different roles and responsibilities.

Financial advisors cannot physically create many of the documents involved in estate plans – that responsibility falls primarily on your estate planning attorney. The advisor serves more as a quarterback of the process, providing big picture guidance on what all needs to be done and how it all fits together. It’s just another reason it’s important to have a full financial team

Digital assets: A 21st-century addition to estate plans

Estate plans used to be limited to the physical realm, but in today’s world, many of your assets may exist online. Travel points, online accounts, social media profiles, NFT investments – the list goes on and on.

Related: Making Sense of Digital Assets

By including your digital assets in your estate plan, you can make it easier for loved ones to access and organize your online information. Your family may also wish to archive social media accounts and collect all those photos you have saved on your desktop. Simply canceling payments for your Netflix subscription can be incredibly difficult if no one knows your login information.

If you have any questions about digital estate planning or need some tips to get started, your estate planning attorney and/or financial advisor should be able to point you in the right direction. 

Why is Estate Planning Important?

There are five main reasons why we encourage our clients to invest in estate planning:

  1. Grief is a very stressful time – Organizing your estate now makes it easier for your loved ones to know what to do and who can help them.
  2. An estate plan gives clear direction to organize and process your physical and digital belongings after you pass.
  3. Loved ones can contact the right people to help close accounts/automated billing more easily.
  4. It makes it easier on those left behind to ensure your belongings are given to who you want to have them.
  5. It helps prevent arguments over which assets belong to each party. To really make it easier, consider including a letter to each beneficiary of your estate explaining why you made the choices you made.

How Often Should You Update Your Estate Plan?

Many people think that estate planning is a “one and done” sort of thing – but in reality, you may need to update your estate plan multiple times in your life. 

Why do clients love Clarity? Read these three real quotes from real clients to find out!

Imagine that you want your assets divided equally among your two grandchildren, so you set up your estate plan to reflect that plan. But a few years later, your family has grown to include another grandchild and even a step-grandchild. Now, your estate plan needs to be updated to reflect your new family members. 

In general, we recommend that you revisit your estate plan after any big life events, including:

  • Births
  • Deaths
  • Marriage
  • Divorce
  • Buying a new home – and there are plenty more!

Check with your financial advisor to see if now would be a good time to update your estate plan.

Can You DIY Estate Planning?

Technically, yes. But we wouldn’t recommend it. Although DIY estate planning can save you money, it also leaves room for errors. Attorneys spend years studying estate planning laws and are generally well-versed on the legal ramifications of the documents they create. In the end, DIY may end up being more costly if you have to redo the documents several times. 

One estate planning aspect we definitely recommend you hire a professional for is a trust. Trusts come in many versions, and if you accidentally create a trust with errors, it could leave a large legal mess for your loved ones. In general, if you’re going to invest in estate planning, it’s probably best to go the professional route so you can feel confident that your estate plan will be carried out as you want. 

Estate planning can feel overwhelming (and easy to push off to a later date), but with a financial planning team on your side, you can be sure that your estate plan is prepared in case of an emergency. Contact your financial advisor today to explore how you could benefit from estate planning preparation.

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