“Do I have an estate plan that will protect my family?”
We get this question all the time.
I love this question because it so clearly comes from someone thinking ahead for the well-being of their loved ones – because an estate plan isn’t just something you do for yourself; it’s a gift you give to the people most important to you.
An estate plan can ensure your assets are passed down to others how you would like them to, provide financial security for your surviving family members, and express your wishes regarding potential healthcare and financial matters. But just as your life and relationships grow and shift over time, so should your estate plan.
Related: The Beginner’s Guide to Estate Planning
So, if you’re wondering whether your estate plan is enough to protect your family, this blog is for you: Let’s explore the basics of estate plans, how to know if yours needs a refresh, and the steps you can take to update your plan.
What Should an Estate Plan Include?
You hear the phrase “estate plan” a lot, but a complete estate plan is a collection of multiple elements rather than a single document. An estate plan should include:
- Your will and/or a trust. How do you want your assets handled when you’re gone? Everyone needs a will, but in many situations, a trust might be a good idea as well.
- Durable power of attorney (POA). Who should make legal and financial decisions on your behalf when you are unable to do so? A power of attorney allows you to choose that person.
- Beneficiary designations. Who receives each account (IRA, 401(k), insurance, etc.) on your passing? These must be updated wherever the account is held. Here at Clarity, we review these with clients regularly for accounts we manage.
- Letter of intent. What instructions do you want to leave for your funeral or other assets? These are sometimes called a “love letter to family” as well.
- Healthcare power of attorney. Who should make medical decisions on your behalf when you are unable to do so?
- Guardianship designations. Who should take care of your children or anyone else in your care?
If anything is unclear in any of these areas, then the court may step in and act on your behalf, which is not ideal because they have no idea what you would want to do.
Also, remember that while these six are the core elements each estate plan should include, you may have other assets that need further instructions, clarifications, or legal considerations. Working with a financial professional or estate planning attorney can help ensure that no stone is left unturned.
Related: Estate Planning 101: Making Sense of Digital Assets
Is Your Estate Plan Enough to Protect Your Family?
If everything on the above list is covered, then you’re well on your way to an estate plan that can protect your loved ones.
The word “protect” also makes me think of insurance – an essential piece of this puzzle. Do you have adequate life insurance? Are your home and business adequately insured in case something happens to you? Are beneficiaries designated on all accounts? Now’s a great time to check in on those accounts.
If you’re asking, “Is my estate plan enough,” you likely already have some plan in place, but you’re wondering if it could be better. If that’s the case, our most significant advice is to Keep it updated.
We recommend checking in at least once every five years or whenever a significant life event occurs, such as a birth, death, wedding or major change in tax status.
How to Update Your Estate Plan
Some pieces of your estate plan can be updated with just a few minutes of your time and a wifi connection – like the beneficiaries listed on your online accounts. Others may require legal assistance or guidance, like a trust or will.
Related: What Updates Should You Make to Your Estate Plan After Your Spouse Dies?
If you need to update your plan, contacting your previous attorney is a great first step. If you need help to prepare, your financial planner can:
- Offer insights and guidance. We can help answer general questions about estate planning – like what needs to be kept and for how long, and tips on organizing – but an attorney must draft and complete the documents. If we hear about tax changes for higher-income clients, an attorney can answer related questions.
- Collaborate or connect you with other professionals. If you’re working with an advisor and require the assistance of an estate planning attorney or other professional, they can often point you in the right direction.
That said, if you have any urgent updates and it will be a while before you can go the official route, it may still be worth it to write, date and sign an interim document and place it somewhere safe. Sometimes, a simple handwritten will may be considered during estate distributions (although that varies by state and case and often requires a notary and/or witnesses). We don’t recommend waiting, though. It is best to have legal documents – but the worst is to have nothing.
An estate plan is a great gift to give yourself and your loved ones, but it’s not a one-and-done task. To feel confident that your family is protected, be sure to review and refresh your estate planning often – and double-check that it includes all the important stuff like your will, POA, beneficiaries, letter of intent, healthcare wishes and guardianship designations.
Protect Your Family with an Updated Estate Plan
Here at Clarity, we know that estate plans are part of a healthy financial life, and we often build estate plan reviews into our regular client relationships.
Interested in creating or refreshing your estate plan? Looking for personalized financial planning guidance? Click here to schedule a complimentary consultation with a member of our team to get started – we’d love to meet you!
