I will not even pretend to be a tax attorney. I may do my own taxes and serve as my own accountant, but I am quite sure I have a fool for an accounting client. My situation is relatively simple and my income is relatively low, so I can get away with doing this. Still, I would not pretend to give you accounting advice or offer solo asset protection advice for a large estate. I have people for that—and by people, I mean several colleagues who are experts in financial fields including wealth management and taxes.
But even though I am not a tax expert—and even though it makes me want to claw my own eyeballs out with a decorative fork—I spend a solid month each year assembling documents, making careful calculations, and examining my finances from every angle. I hate money and I don’t fully understand the IRS, but I do care about accuracy and honesty. I know it has to be done. I finish the previous year’s accounting and I plan for the next, paying special attention to trends. I don’t do this because I enjoy it. It is torture, in fact. I do it because taxes are certain.
Death is also certain. You cannot escape it, and you do not know when it will happen. Another certainty is that your things—whether real estate, bank accounts, pets, furnishings, art collections, jewelry, or digital secrets—will mostly outlive you. What then?
What the H-E-Double-Hockey-Sticks is Estate Planning?
Estate planning is the process of creating a legal plan for the management and distribution of your assets—the house, the cars, the family jewels, the art collection—after your death. It is an important part of financial planning, but many people avoid it until it is too late.
People avoid estate planning for a number of reasons. Some people think it is only necessary for the wealthy. If you do not actually have an art collection, you cannot distribute one! Others believe it is too complex or expensive, hearing outrageous price tags or horror stories from neighbors about estate planning rip-offs. Still others simply do not want to think about their own deaths—completely relatable from my perspective.
Age and Wealth Do Not Matter to Death
I assure you, estate planning is not just for the wealthy, not just for the old, and not just for those who embrace the Great Hereafter. First, an estate plan can help to ensure that the assets you do have are distributed according to your wishes. Think about it: even if you are not wealthy, you have stuff. You have various accounts, probably vehicles or furnishings, perhaps a retirement account with a little money in it, and some things that are precious to you. Without an estate plan, your assets will be distributed according to Kansas intestate (meaning without a Will) succession laws, which may not be what you want. Your wayward son or your sketchy sister may step in and take things you’d rather they not have, or your kids might have to spend your money to settle things and end up with very little. But make a plan, and your wishes will most likely be followed.
Second, an estate plan can help to avoid probate. Probate is the legal process of distributing a deceased person's assets. It can be a time-consuming and expensive process, and it is also public. (I am not one of those attorneys who tries to scare people away from probate. In fact, it is sometimes necessary and helpful; however, if one can avoid it, it is usually best to do so.) At the precise time your husband or kids or siblings or parents should be dealing with their grief and taking care of one another, they could be forced to deal with an unpleasant court case and a list of tasks from a lawyer. A good estate plan can help to avoid probate for some or all of your assets.
Third, an estate plan can help to protect your loved ones. If you have minor children, for example, an estate plan can designate who will be their guardian. It is foolish to go without a plan for them, because why would you leave these decisions to a judge who doesn’t even know you when you could instead choose the guardians yourself?! If you are older, have a health condition, or simply want to guard against an unpleasant situation, you can also use your Will to name a guardian or conservator for yourself in the event you are incapacitated. An estate plan can also help to protect your assets from creditors and lawsuits, if that is of concern.
None of these problems is restricted to wealthy people, old people, or fearless people. Everyone dies, just as everyone poops. Everyone should have a plan, just as everyone should eat some fiber.
Plan Early, Plan Often
One of the most common mistakes people make is waiting too long to start estate planning. It is important to start estate planning early, even if you are young and healthy. There are a number of reasons for this.
Life is unpredictable. You never know when you might become incapacitated or die! If you do not have an estate plan in place, your loved ones may be left scrambling to figure out what to do. And if you ask around, you will encounter someone who has experienced the business end of an unplanned death.
Your assets and circumstances change over time. As you get older, you may acquire new assets, such as a home or business. You may also get married or divorced or have children. It is important to update your estate plan as your life changes. At a minimum, I recommend a review every five years or after every major life event.
You need time to think about your wishes. Planning early and often buys you time to carefully consider what you want and to create a plan that is tailored to your specific needs. You make decisions every day! You can certainly make decisions that have an impact after your death, maintaining control over the things that can be controlled. It also gives you more time to implement your plan and to educate your loved ones about it.
Know Where to Begin
If you are new to estate planning, there are a few things you can do to get started. First, meet with an experienced estate planning attorney. An attorney can help you to understand your options and to create a plan that is right for you. (Or if you are very savvy and have a simple scenario like my tax one, you might even find an online source that can help you write a plan.)
Second, gather all of your financial information. This might include your bank statements, investment statements, and insurance policies—or at least a list of asset types and locations. This information will help your attorney to create an accurate inventory of your assets, as well as handle any future transfers that can happen outside of probate.
Third, think about your wishes. Whom do you want to inherit your assets? Do you have any special requests, such as wanting certain assets to go to specific people? Is there anyone you need to cut out? Who would be good at taking care of your kids or taking care of you if the need arises?
Once you have gathered this information and thought about your wishes, your attorney can help you to create an estate plan. The specific documents that you need will vary depending on your individual circumstances. However, some common estate planning documents include:
A will and/or trust
Powers of attorney
A living will
Probate avoidance devices such as beneficiary designations or transfer-on-death documents
Get On It!
Estate planning is an important part of financial planning, and I promise you it is not that scary. Like other things we tend to avoid—doing our taxes, having difficult conversations or making apologies, painting the front porch—it is definitely not as bad as what you are dreading. Planning can help to ensure that your assets are distributed according to your wishes, avoid probate, and protect your loved ones. So stop avoiding, and just click the button for an estate planning consultation today. If I can do my monthly finances (which are super-scary), you can do this. I might be able to help. Just . . . please, for both our sakes, do not ask me to do your taxes.