Inspired by the Pandemic: Consider This Checklist as a Starting Place to Get Things in Order and Protect Your Estate
Among the lessons learned during the COVID pandemic – too often learned the hard way – is the imperative to prepare ourselves for the unexpected. Three years ago, few people could have predicted the upheaval triggered by lockdowns, illness, and, tragically, premature death. In this 2022 article from the Kiplinger financial website, financial planner Ron Brown urges that we use the pandemic as a cautionary tale, and a trigger to get our houses in order, so to speak.
Elsewhere this week on the AgingOptions Blog, we’re featuring a sad story about yet another celebrity estate triggering a high-profile legal battle. Your estate is no doubt considerably more down to earth, but the lessons are similar. In his article, Brown offers a fairly basic checklist of important estate planning to-do items that can help you and your loved ones be better prepared for any eventuality.
Even if we never again face something as disruptive and far-reaching as the COVID pandemic – and that’s a big “if” – we think this is a good list to review with your spouse and your estate planning team (even if you’re not a celebrity).
Lesson Number One: Expect the Unexpected
“If there is a poignant reality the pandemic has taught us all,” Brown begins, “it is to expect the unexpected.” It’s no secret that the COVID-19 pandemic has thrown plenty of curveballs our way, but between disease, stock market shifts, civil unrest, the Great Resignation, and lockdowns, the last few years have shown us that we never really know what’s coming around the bend.
“As of late February ,” Brown writes, “the virus has taken over 970,000 lives in the U.S. alone, which has had a heartbreaking and life-altering impact on so many families. When it comes to unexpected events, there are few more difficult than the death of a loved one, and it can become more strenuous without a comprehensive estate plan in place.” (Note that CDC data now pegs the COVID death toll in the U.S. at over 1.1 million.)
There’s no time like the present to learn about and implement the basics of estate planning. Here are Brown’s tips.
Ensure You Have an Updated Will
As we’ve written about on this blog before, it can be easy to treat your will as a “one-and-done” task. But wills should change with your circumstances, and need to be updated periodically. “Many people are concerned about where their assets will go after they die,” Brown writes, “and it is, therefore, important to have a will…and that you update it at regular intervals.”
A will isn’t just for high-rollers, either. “Even if your planned asset division is relatively simple, a will is a necessity to protect your assets and the loved ones who will receive them,” Brown asserts. “This is also a good opportunity to inventory your assets and take full stock of what needs to be considered within your estate plan, from real estate and automobiles all the way down to items like tools and clothing.” Working with a financial planner can make this inventory process very simple, but there are also free checklists available online as a resource.
One strong note of caution: we urge you not to try to plan your estate using “one size fits all” online legal documents. You might save a bit upfront, but you can reap a harvest of huge headaches for your heirs by relying on cheap shortcuts. Not all legal document creators are alike! Good legal advice is priceless in the long run, so don’t entrust your estate plan to inexpensive, generic online documents. Consult a qualified legal professional.
Prepare a Power of Attorney for Financial Situations
A fairly well-known element of estate planning, your financial power of authority gives an individual final say on your behalf if you’re incapacitated or fall ill. “This is particularly important as it relates to being able to manage financial transactions when an individual is unable to do so. In some cases, the power of attorney may also be able to execute certain duties after one’s death, particularly if there is no estate executor,” Brown explains.
He adds, “The bottom line is that having someone you trust with power of attorney capabilities in case of incapacitation, illness or death is a good safeguard for your assets.” We’ve seen too many families face the chaotic consequences when a loved one fails to take this vital step.
We also suggest you appoint a health care power of attorney who can help guarantee that your wishes on the types of care you want to receive are carried out. Don’t leave it to chance.
Designate Beneficiaries to your Retirement Account(s)
Similarly, you should also have trusted beneficiaries—both primary and secondary—listed for your retirement accounts and insurance policies. “These beneficiary pronouncements override the will, so whoever is the estate executor will not have to figure out to whom these accounts go, nor will the accounts need to go through the costly probate process,” Brown writes.
This usually only takes a few minutes to set up or update, and is well worth the time. This is especially true if you’re divorced. You may find your money going to an ex-spouse instead of a current one simply because you never revised the beneficiary form on that old 401(k).
Understand Estate Tax Laws
“While federal estate taxes can be up to 40 percent, only the wealthiest of Americans have to worry about them,” Brown writes. These taxes can fluctuate based on which state you’re in, and the federal exemption is set to decrease in 2026.
This may not be a concern for everyone, but Brown warns, “If this is a concern for you, you can start taking actionable steps, such as giving money under the annual gift tax exclusion.”
Indeed, generosity can save you in taxes. “For 2022,” the article states, “each person can gift up to $16,000 per recipient. For those who are married, each spouse can gift $16,000 to the same recipient, for a total of $32,000 each, and you can make gifts to as many people as you like. This is a way to diminish the exposure of your estate to taxes.” (Note that, for 2023, the gift tax exclusion has risen to $17,000 per individual or $34,000 per couple.)
Consider a Trust for Your Estate
When we think of trusts, we often think they’re only for the wealthiest among us. But trusts can be quite useful no matter who you are. “If you are aware of where you want everything to go when you die, you might want to use a trust fund,” Brown writes. “A trust denotes how your assets will be disseminated after your death, and it allows for specificity. It also ensures that items within it avoid probate court, which can be costly for the estate. In doing this, it also ensures privacy around the specific assets and amounts, and it is harder to contest than a will.”
Don’t Forget the Details – Including Your Pet
Estate planning can be such a detailed subject that it’s easy to overlook certain elements. Don’t let your furry or feathered friends be one of them! “It’s important to include [your pets] in your estate plan, whether it is a designation of who will pay its bills, who will take care of it or where it will be placed,” Brown explains. “In fact, you can even create a pet trust to manage your animal after you are gone.”
It’s easy to delay estate planning, assuming you’ll always have more time. But if recent years have taught us anything, it’s that our time on this earth is not guaranteed.
We’ll end with Brown’s own concluding words: “Once you have an initial estate plan in place, it will be much easier to make updates and changes as necessary. Don’t let yourself get caught off-guard by unexpected circumstances; make estate planning a priority now for you and your loved ones.”
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(originally reported at www.kiplinger.com)