By FPA member Joy Slabaugh, CFP®
Last Updated: January 25, 2010
News headlines of disasters, terror, and tragic, unexpected deaths are only stories until a shocking incident occurs. Even then, we mourn the horror but rarely take action to protect our families from the fallout of a similar disaster. An AARP poll showed that while many adults are aware of the need for estate planning, less than half have actually taken any action. It is easy to delay estate planning when tragedy is only a headline, yet the statistics of death tell us that we should all prepare our families for the worst, regardless of age or wealth.
"An estate plan addresses what happens to the family when you are gone," says FPA member Charles R. Wolpoff, JD, LLM, CFP®, CRPC®, a principal of Wolpoff Financial Group LLC in Westminster and Towson, Maryland. Even for the simplest estate, there are issues that need to be handled. "If you care about your family, you will leave them with a plan of action," said Wolpoff. He recommends creating this plan of action with a financial planner who does comprehensive planning. Not only can the planner help you create the plan of action, she or he can also help your family implement that plan. FPA member Steven M. Berger, an estate planning attorney in Severna Park, Maryland, agrees with Wolpoff. "More than anything, the process of thinking things through is the valuable part of estate planning," Berger said. Whether you choose to work with an estate professional or decide to do your own planning, certain principles can make the transition easier for your family.
Even the best plan of action is useless if the family doesn't know about it. "The first three rules of estate planning are communication, communication and communication," says Wolpoff. When a family is experiencing shock from an unexpected loss, fear of the unknown only adds to the burden. Wolpoff believes, "The family needs to know what the estate plan is, what the assets are, who the advisors are, what's in the will and why."
Make sure things are organized
Your heirs will need a list of assets, where they are held, and how they are to be distributed. Wolpoff recommends, "You also need to have a to-do list for the family and the survivors. This list should instruct what they should do the day after, the week after, etc. For example, one of the first things is to contact the life insurance company. The death benefit can provide liquidity at a critical time." Other items on this to-do list may include burial instructions, paying bills and claiming benefits. Providing your family with practical information before it is needed will help reduce the level of stress on your family and make it easier for them to rebuild their lives.
Be proactive and select a responsible party to handle different issues, especially those included on the to-do list referenced above. "Usually, people have a most trusted advisor that they trust the children to go to for assistance," Wolpoff said. "This is not necessarily the executor of the will." Ideally, this person is not only trustworthy, but can be a calming influence on the family.
While children are still minors, you will need to establish legal successor guardians and prepare those guardians for their potential roles. "Make sure the successor guardians are aware of your intentions," suggests Eric W. Johnston, CFP®, with InFocus Financial Advisors in Salisbury, Maryland. "Everybody thinks their sister or brother will happily serve as a guardian, but they may not be willing."
Your family needs to know where you keep the important documents, the to-do list, and how to contact your advisers. Your personal representative needs to know your assets, liabilities and cash-flow. Successor guardians need to know whom to contact for funds. Communicating this information to the appropriate parties is a vital factor of estate planning. Consider creating an "In Case of Emergency" file or binder with these comprehensive instructions for your family. Provided instructions for accessing sensitive information should be included in the binder, the documents themselves can even be located elsewhere. "Your attorney or financial planner should have a signed copy of your estate documents," said Johnston. The goal is to make it as simple as possible for your family to take the next steps.
Communicating the intent behind your plan is just as important as the information itself. "Disaster can befall a family after someone dies when there are misunderstandings and resentments," said Wolpoff. "This often happens because no one says anything about the estate plan and why." Wolpoff recommends combating this by involving your family in your estate planning but acknowledge it can be difficult. "It is hard enough to get couples to do planning together and getting them to include their adult children is like asking them to jump off the roof," he said. "But it can be so helpful if you can get the family together." Wolpoff says the goal is not democratic estate planning where you ask your family their wishes, but an open dialogue where you explain what you are doing and why. "If you open up two-way communication, your family may offer a valuable suggestion you did not think of," said Wolpoff. "Or, if there is any resentment or misunderstanding, you can clarify them while you are living."
Revisit the plan
As life evolves, your priorities may shift. Review your plan with your financial planner or estate planner to make sure the plan will still accomplish your goals.
Don't wait to take action. While we all hope to live a long and happy life, have a plan for those you would leave behind in the event you become a statistic. Contact your estate planning professional or find a financial planner specializing in estate planning.
FPA member Joy Slabaugh is a speaker, writer, and CFP® professional practicing in Delmar, Delaware.
Securities and investment advisory services offered through H. Beck Inc. H. Beck, Inc. and EST Financial Group are not affiliated.