7 Things Your Estate Plan Might Have Missed

If your goal is to look out for your loved ones, consider tackling these estate-planning additional jobs

Christine Benz 30 July, 2020 | 9:47AM

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Estate planning and writing a will are among the easiest financial-planning to-do lists to put off. It’s certainly not fun to ponder your own mortality, and yet that’s the very nature of estate planning. Lawyers are often involved, so it can be hard to get it done on the cheap. And while most financial-planning jobs provide at least some pay-off during your lifetime, estate planning isn’t as much for you as it is for your loved ones.

Given all of those reasons, it’s no wonder that so many individuals put off creating or updating on an estate plan. But anecdotally, at least, the pandemic seems to be lighting a fire under some people to get serious about creating or updating their estate plans once and for all.

Making sure you have the key estate planning documents in place is important; that means a will, powers of attorney for healthcare and financial matters, and guardianships for minor children, first and foremost. Trusts may also make sense in certain situations.

But there are other add-ons to think about too, especially if your goal is to make life as easy for your loved ones as possible and to ensure that your wishes are carried out after your death. And, unlike a traditional estate plan, you can craft at least some of these documents on your own, without the aid of an attorney.

1. A Financial Overview

Create a master directory for your loved ones, covering everything from bills to bank accounts. (These documents can also come in handy if you’re the main financial decision-maker in your household and your spouse doesn’t pay too much attention.) 

A financial overview lays out the basics of your finances in a straightforward narrative. It can be especially helpful if your loved ones aren’t especially well-versed in financial matters. Potential headings to consider might include:

  • Our estate plan (in very broad outlines: where to find the documents and who the key agents are, such as the executors).
  • Our key financial assets (no amounts or account numbers; just where we hold the accounts and who owns them).
  • Our insurance coverage (property, health, life).
  • Cars (registered keeper, whether there are car payments).
  • Regular household bills that we pay.

2. A Master Directory

Think of a master directory as the detailed version of your financial overview. Whereas the financial overview is a Microsoft Word document, this is the Excel version. For example, your financial overview might say, "We each have retirement funds: Emily’s is with fund A and Jake’s is with fund B." But the master directory would include the actual account numbers for those accounts, the websites, and the names of any individuals you deal with at those institutions. Because the master directory includes sensitive information, it’s crucial to encrypt it or, if it’s a physical document, to keep it under lock and key.

3. A Plan for your Personal Property

Most wills will state that any tangible personal property, like furniture, should be sold and the proceeds added to your estate. But if you have sentimental or valuable items that you’d like to earmark for specific individuals, such as jewellery or artwork, you can also specify who you would like to inherit those items. For your own sanity, don’t go overboard in earmarking every little thing for specific individuals; focus on those items you treasure that will also have meaning for the recipients. 

4. A Plan for your Pets

If you’re an animal lover, you know that pets aren’t possessions; they’re part of the family. Thus, more and more estate plans include provisions for furry friends. There are a few ways to incorporate pets into an estate plan: the gold standard, albeit one that entails costs to set up, is a pet trust. Through such a trust, you detail which pets are covered, who you'd like to care for them and how, and leave an amount of money to cover the pet's ongoing care.

Alternatively, you can use a will to specify a caretaker for your pet and leave additional assets to that person to care for the pet; the downside of this arrangement is that the person who inherits those assets isn't legally bound to use the money for the pet's care. At a minimum, develop at least a verbally communicated plan for caretaking for your pet if you’re unable to do so - either on a short- or long-term basis.

5. A Digital Estate Plan 

Even people who think they've ticked off all the usual boxes on their estate-planning to-do list may have overlooked an increasingly important component of the process: ensuring the proper management and orderly transfer of their digital assets.

Just as traditional estate planning relates to the management and transfer of financial accounts and hard assets, digital estate-planning encompasses your digital possessions such as data stored on devices or in the cloud and social media accounts.

The laws around digital assets are changing quickly, and different providers have different policies/level of access. But a key first step is taking an inventory of all of your digital accounts and storing it in a secure but accessible location. You can include it as a separate sheet on your master directory, discussed above. 

6. A Plan for the End of Life

While an advance directive (or living will) details your attitude toward life-extending care, these tend to be fairly generic. If you’d like to add additional background for your spouse, children, or other loved ones who might be making healthcare decisions on your behalf, check out "The Conversation Project." It offers a starter kit to help you clarify your thinking and discuss these matters with your loved ones.

It's also worthwhile spelling out your wishes for funerals, memorials, and the disposition of your body, either verbally, in writing, or both - even if your wishes are simpy to let your loved ones decide. 

7. An Ethical will

Last but not least, consider writing or recording an ethical will that spells out your beliefs and values. In contrast with a conventional will, which lays out how you’d like your financial and physical property to be distributed, an ethical will is a way to "hand down" your belief system to your loved ones.

The concept has gained more interest over the past decade but it's a heavy assignment, so don’t too much pressure on yourself to be profound or to write an ethical will all at once. Instead, consider starting your ethical will by jotting down your beliefs as they occur to you. To help remove some of the pressure, balance light bits of wisdom ("always keep a bottle of champagne in the refrigerator, so that you can celebrate happy events big and small") with the deeper life lessons that you've learned.

This article originally appeared on Morningstar.com

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author

Christine Benz

Christine Benz  is director of personal finance at Morningstar and author of 30-Minute Money Solutions: A Step-by-Step Guide to Managing Your Finances.

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