A day-by-day approach to getting yourself mentally prepared to do estate planning.
(We put this together for our Facebook page during COVID-19 in April, 2020.)
DAY 1. Get a folder and mark it “estate planning.” It’s time to get your estate plan in order. No more procrastinating! You are going to go on a journey that will be invaluable to your loved ones at some point.
DAY 2. Make a list of important phone numbers, addresses, and email addresses. Write your full name and your date of birth on the top. Then list contact info for the following:
1. In case of emergency contact
5. Next door neighbors
6. Primary doctor
7. Specialty doctor(s)
13. Financial Advisor
14. Tax Preparer
Now, since you’re on such a roll, make sure you have that information in your cell phone, too. Consider making a modified copy to hang on your refrigerator or in your address book.
DAY 3. Think about specific tangible items you’d like to pass along to someone else. (e.g. that special painting, Grandma’s bureau, Uncle Jack’s old hunting rifle, your wedding ring, etc.) It’s funny – sometimes, the most coveted items have no real value, like Mom’s cutting board.
You have the choice of specifically choosing who will receive these items. You can change your mind whenever you want by revising your list. Your list can be written by hand and doesn’t require witnesses or Notarization. It’s just a list, although it is strongly recommended that you sign and date this list. Your list can have one item on it, or thirty, or two hundred. It doesn’t need to be limited to your family.
In estate planning lingo, this is called a Tangible Personal Property Memo (TPP). It’s an addendum to your Will, but even if you don’t have a Will (yet) this can be a document you use.
If you don’t have this list, everything you own will pass by default to your heirs (either as listed in your Will or, without a Will, whoever the State says is your heir).
DAY 4. Make a list of the real estate you own. If you have a copy of the tax bill, it would be great to staple it to this list. If you don’t have a copy of the bill, you can usually print these from your town’s website. These bills have all sorts of useful information on them. If you have a copy of the deed, that would be great to include, too, but don’t worry if you can’t put your hands on that right now.
Your list is going to include WHERE THE REAL ESTATE IS LOCATED (city and state at minimum), approximately HOW MUCH IT’S WORTH (look at the valuation on that tax bill we were just talking about for a ballpark figure), HOW MUCH YOU OWE on it, and HOW IT IS TITLED (e.g. as joint tenants with your spouse, as tenants in common with your sister, just by you, in your revocable trust, in an LLC).
Day 5. You are going to do some photo sorting. But more than sorting, you are going to take this time to write on the backs of some of them. Who, where, when. Family stories are getting lost from generation to generation. We live in the here and now – we don’t make time to look through pictures together, to reminisce about that time Aunt Bertha broke the chair at Christmas, to gaze affectionately at those adorable baby pictures of someone (is that Grandpa?) from the 1930s. Don’t feel guilty about throwing out pictures that no longer have meaning. They served a purpose when you took them and you are not obligated to hold on to them forever.
Estate planning is about more than finances – it’s about leaving a legacy. You are a steward of your family’s history.
DAY 6. Usually you receive investment statements on a quarterly basis; these would include statements for a 401(k), IRA, investment account, etc. Investment statements that aren’t related to the stock market usually come less frequently (like CD notices or life insurance statements). Transactional account statements usually arrive more frequently (checking account statements, credit card bills).
As these statements arrive, save some portion of these statements in your folder. (Alternatively, make a list of this same data.) Making this list or saving these statements is important because they will have the institution’s contact information, account name, account number, and account value. (If you’re a private person, you could black out the balance or could save this information somewhere more private, with the caveat being that someone needs to know where to find it after you’ve died.)
Create one consolidated pile of financial statement information. If you’ve gone paperless, write down the information or print a copy of the statement for your file. These non-paper accounts are much harder to track down than the ones that arrive in the mail after the owner has passed.
When you die, someone has to “unwind” your life. They close out accounts, transfer real estate, and pay final bills. One of the first questions they have to figure out is if your estate has to go through the probate process (a formal process involving the Probate Court) and that depends on what you own. Imagine how much easier it will be if this person pulls out the file folder you’re creating now and knows exactly where your real estate is and approximate values of your accounts!
DAY 7. Save your tax returns somewhere for the person handling your estate. Whether you save it in your safe box so it’s only found after you pass, or you keep it in a drawer in your bedroom, or you save it digitally – leave some clue on where to find this information after you’re gone.
DAY 8. Estate planning covers two big areas — what happens if you’re alive but unable to make decisions for yourself and what happens after you die.
Use our one-page form below to get you thinking (also attached at the end of this document). There are questions like: would you want to have CPR performed, are you okay with artificial hydration, should a ventilator be used? Most of these answers aren’t a simple yes or no. You probably have some ideas about what would trigger one phase into the next. How you feel about this situation is entirely unique. Your ethics and religious beliefs are factors, as are your age and overall health, as are concerns about being a burden or not leading a life with meaning.
DAY 9. Complete your first estate planning document. You’ve done the thinking and the talking over the past few days – now you need to put it in writing. Maine has a standardized Advance Health Care Directive (as in, directions for your health care that you are specifying in advance of when you need them). Each state has its own requirements, so make sure the document you use is from the state you live in. Your health care power of attorney may already incorporate this data.
We have a fill-in version of this form free on our website – you’ll need to print and sign in front of a few witnesses. Then send a copy to your primary care provider. Keep another copy in this folder and let your next of kin know that you’ve completed it.
DAY 10. Not all assets will be governed by your Will. IRAs, retirement plan accounts, and life insurance, for example, have beneficiary agreements. When you open those accounts, they give you a page called Beneficiary Designation Form (or similar). What often happens is that you complete it and never think about it again. What if you opened that IRA at age 25, before you had kids? You started the 401(k) account before your divorce? You’ve remarried since you initially purchased your life insurance? Your sister has passed away, but she’s still named as the primary beneficiary? You get the idea.
Your task is to review beneficiary designations. Keep a copy of the completed info in your folder. Some accounts list beneficiary information on your statements (usually seen with retirement plan accounts). For others, you may have to dig through paperwork, access your account online, or even call the company to find out what you wrote.
It’s important to understand that what you have on file with these companies is the only thing that matters. They won’t honor instructions that you never mailed in or a special sticky note that indicates you changed your mind. What you wrote in your Will does not affect these types of accounts.
DAY 11. Take a walk around your house and ask yourself, “If I were hospitalized for a month and someone else had to take care of this house, what would they need to know?” Create a rough sketch of the house and identify things like the well cap location, where the furnace is, if you have a leach field, where you buy your heating fuel, who your electrician is, and so on.
DAY 12. Safe deposit boxes and safes, by their very nature, are meant to protect things from other people. This is a double-edged sword. Some of their protective measures can also keep the good guys out. A little planning will go a long way.
Example: you are the only person named on your bank safe deposit box. You keep your Will in there. You die. Your family goes to the bank and says, “We need to open the box and get that Will out.” The banks says, “You are not authorized.” Your family explains the situation again; the bank explains their answer again. It is an impasse unless your family can prove that the Will would give them the authority to do this. AND, if the key is hidden so no one can find it, plan on $150ish to drill the box.
What are some solutions? If you choose to keep your estate planning original documents in a safe, make sure you have copies outside of the safe (and someone knows where they are). Most attorneys keep scanned copies of your documents, but that won’t help if you prepared your Will twenty years ago.* Remember that banks are not open on weekends: if you have a terrible car accident on Friday at 5:01pm and your Power of Attorney documents are in a safe deposit box, there is no way to access them until Monday at 8:01am. You could consider having more than one person on your safe deposit box — but that would make them effectively joint owners with you, which may have much broader implications. If you are using a home safe, think about who needs to access to the code/key and how they’ll obtain that when the time is right.
*If you prepared your Will twenty years ago and haven’t updated it since, it probably needs it. Laws have changed and, most likely, your personal situation and asset accumulation are different now.
DAY 13. “Digital assets” refers to accounts where there is nothing tangible to own and they live online. You could broadly think of it like intellectual property. Easy examples are photographs, videos, and anything in cloud storage. The next realization includes social media accounts, email accounts, and blogs. What about your phone and all of the data on it? Your credit at Amazon, your Netflix password, the online banking account? That app that transfers money? The cache of frequent flier miles?
Suddenly you realize that you have a lot of valuable items in the digital world.
This a new frontier for estate planning. Laws are changing frequently and people do their best to plan for how to pass this information along.
Like many of our other topics discussed in this series, you’re trying to bridge the gap of making information available to whoever takes over your affairs after death, while safeguarding your privacy in the present. There’s no perfect answer, but if you’ve at least made some plans for relaying information, it’ll help.
Our best advice at this time is to put some thought into this and make a list of accounts to keep with your private estate planning documents. Yes, passwords change all of the time. The list may be totally obsolete by the time someone needs to use it, but it’ll be a start, and maybe having the username will be enough to claim the account later. Every company you’ll deal with will have different rules.
The form below from our website has more information on this topic and a worksheet you can use if desired. You could also look into online “password manager” apps as a possible solution.
DAY 14. The young people in your life require particular consideration. If you are the parent or guardian of minors, there are a few things that require your attention sooner rather than later.
1) What happens if you die tomorrow? Who will be the guardian for these kids? Is there a second parent involved? Are you an older guardian? Do these kids have special needs (either Special Needs or special needs)?
2) What happens if you are seriously injured tomorrow? It’s the same thought process, but now we’re thinking about a temporary placement rather than permanent.
You get to have a say in these decisions. You can make your wishes known in your documents. You can complete a declaration in the event of incapacity and you can indicate a guardian in your Will in the event of death.
The other big thing to consider is that you may want to leave assets to minors, but who knows what age they’ll be when they receive them. You want to have your documents carefully worded for any possibility. A common solution is to have assets managed by someone else until the child reaches a certain age (e.g. 18, 25, or 30).
DAY 15. Is donating to charity something that’s important to you? If so, do you want to make that donation during life or after death? Should it be anonymous? If the amount you can give is small but has a specific purpose, can a community foundation help? Have you talked to your attorney about charitable trusts or privation foundations? Your accountant can talk to you about gifts of specific assets that may have a tax benefit when transferred. Many organizations have “planned giving” experts who will help you get the exact wording right so, for example, your college receives a certain gift from your estate.
Jot down a specific list while you’re thinking today. When you do your official documents with your attorney, talk about your wishes. Maybe you want 80% of your money to go to people you love and 20% to go to charity. Or establish a special scholarship. Perhaps your church should receive everything. There are many choices and ways to accomplish it, but you need to know to start the conversation.
DAY 16. When you give someone “power of attorney,” you are giving that person the authority to act on your behalf. The document outlines what the person (usually called the Agent) can or cannot do. For the financial power of attorney, you are declaring that if there’s a time when you can’t deal with your own issues, this person is authorized to act as you. You might have it effective immediately, or it can “spring” into use when your doctor declares you incompetent.
If your document says “durable,” it means the powers endure even if you lose competency. If your document says “limited,” it was probably created for a one-time action, like authorizing someone to sign real estate documents on your behalf.
Usually, estate planning attorneys create separate documents for financial matters versus medical matters. The decision-making process is very different and you don’t necessarily want the same person doing both. The financial POA gives someone the authority to:
~ Handle your bank account
~ Negotiate and pay bills
~ Give or accept gifts
~ Open accounts
~ Buy or sell real estate
~ Sign tax forms
This person would also handle the ordinary things of life: making sure the mail gets picked up, arranging for repair of the furnace, buying a replacement refrigerator, applying for MaineCare, purchasing a mortuary trust – whatever the case may be.
This role isn’t glamorous. It’s hard. Don’t look at it as an honor you’re bestowing on your child. It’s a lot of work and not everyone is capable of running someone else’s life in conjunction with their own. Put some thought into who can do the task. Who would be good at it, who is nearby, who isn’t in poor health, who has the time and organization skills? Then think of an alternate, just in case choice #1 is unable or unwilling to serve. Some attorneys will serve if you don’t have suitable options.
DAY 17. The health care power of attorney names someone else to act on your behalf. Usually you set them up in case you become incapacitated at some future time, but sometimes there are reasons for them to go into effect immediately, like maybe you’re going through cancer treatments and you’d like your partner to deal with everything since you don’t have the energy.
The health care (or healthcare, or medical) power of attorney allows someone else to make health decisions for you. They can access your records and speak to the medical staff with authority about procedures that should or should not be performed. This can be a matter of life or death. They can authorize tests, medications, screenings, and life support. If you’ve had the important discussions with your agent beforehand, he or she will feel empowered to act on your wishes.
This role is important and can be very challenging. Pick someone who is suited to it. If you think it will be a source of conflict to name one child over the others, either have a candid conversation with them now about your rationale or pick someone else. Be careful about asking two people to serve together – what happens if they don’t agree on something critical?
DAY 18. It’s the final day of our estate planning workout. Your Will controls what happens to your stuff after death. It names who will handle things (called the Personal Representative in Maine) and gives instruction about how to dispose of assets. Some devises are finite (e.g. $10,000 to my daughter) and some are more fluid (e.g. 25% of my estate after expenses have been paid). The Will can also specifically leave someone out from inheriting. A Will can have language that creates a trust upon death (maybe to cover a beneficiary who is too young to inherit). You can reference a list or memo (called the Tangible Personal Property Memo) if you have specific items meant for specific people.
It may be more important to remind you what the Will may NOT cover, depending on how things are titled:
~ Your real estate
~ Your IRAs, life insurance, or annuities
~ Assets you own with a “transfer on death” designation
~ Anything held in trust
For many people, this list will cover the lion’s share of what they own. That’s why we did those earlier exercises to figure out what you own and how it’s titled!
You are not expected to understand the nuances of how all of these different assets need to be handled so that things flow the way you want them to. Some people choose to do their own documents, like using an online program, and that can work if your life is simple. It’s generally worth the cost of going to an estate planning attorney to have personalized documents drawn up. If you’ve done all of this work, you’ll be ready for any question they throw at you!