By Scott Ford, CEO, founder and wealth advisor of Cornerstone Wealth Management Group
As a financial advisor who has helped numerous families with estate planning, I have seen the effects of good planning. Most of us understand that having an estate plan is crucial, yet only around half of Americans have done any estate planning,1 which means half the population is taking a huge risk when it comes to caring for their families and assets.
Too often, it’s usually because people assume they don’t have enough wealth to need an estate plan. In fact, if you look at this infographic, you’ll see that only 27% of people acknowledge they need an estate plan.
Regardless of how much or how little you have to your name, if you don’t create a plan, you are leaving your loved ones with legal headaches. Your family will be left to guess how to handle end of life care and how to divide the assets, and probate and taxes may diminish the assets you’ve left behind.
While it may seem daunting, the process of thinking through your estate plan does not need to be complicated or stressful, and the ensuing benefits are invaluable. Here, we share five critical steps you can start putting into place today.
1. Draft a Will
Millionaires or not, everyone needs a will to spell out their wishes and name someone to handle their financial affairs. Everyone’s will is unique and features different requests, but a few standard essentials to include are:
- Guardianship. If you’re a parent of a young child, this can be one of the most important parts of your will. Here, you can name a legal guardian for your minor children should you pass away before they are legal adults.
- Assets. In your will, you’ll define which heir gets what, including percentages of your savings, specific accounts, certain properties, cars, or other valuables and sentimental items.
- Real Property. Beyond assets, you may also have homes and buildings that you want to leave to specific people.
Once your will is drafted, you’ll want to keep it up-to-date. Review it at least every two to three years and whenever there is a major life event, such as a marriage, divorce, death, or birth.
2. Choose an Executor, Durable and Healthcare Powers of Attorney
It’s important to spend time considering who you’ll select as your executor, durable power of attorney, and healthcare power of attorney. In some cases, one person may serve in all three positions, or you may assign each task to a different person, depending on their strengths or your preferences.
Being an executor is a serious responsibility with a lot of obligations and big decisions to make. While you want to choose someone close to you and who you trust, you also want to make sure the person is up to the task. With so many financial responsibilities, your durable power of attorney should be someone who is organized, financially savvy, and willing to take on such a critical task. Your medical power of attorney should be someone who you trust to make important medical decisions if you’re unable to do so. Consider speaking with your closest family on who would be best suited to serve in these roles.
3. Consider a Trust Fund
Depending on what you want to accomplish with your assets and the specific needs of your situation, you may want to look into setting up a trust fund for your heirs. Trusts can be a wise way to ensure that the legacy you’re leaving behind is protected, and there are also significant tax benefits because money in trusts bypass probate.
One option is to set up a Living Trust, which is also known as a revocable trust. In the event of your death, the trust ends and is distributed to designated beneficiaries, similar to that of a will, except that the process is quicker and the assets are not taxed. Work with an estate attorney to discuss your options and if a trust is appropriate for your situation, needs, and wishes.
4. Organize All Important Documents
It’s important to keep all of your estate planning documents safe and accessible when they’re needed. In one central location, organize all important documents, including:
- Tax returns from the past seven years
- Insurance policies
- 401(k) statements
- Bank account information
- Mortgage paperwork
- Loan documents
- Brokerage statements
- Social Security, health insurance, and Medicare cards
- Contact information for your financial advisor, doctors, lawyer, and accountant
- Will
Make sure your spouse or closest family member knows where to find this information.
5. Rely on Professionals
Planning an estate involves many intricate details and time-consuming tasks, but don’t let that prevent you from getting your affairs in order when a professional is available to help. While it is possible to create wills online nowadays, there are often complex nuances to estate laws, and regulations differ from state to state.
An estate lawyer can help you sort through some of the different options to help you create the best plan for you and your loved ones. You should also consider meeting with your advisor, as he or she is heavily involved in your financial life and can work with you to make a plan for your assets.
Getting Started
It is never too early to start putting a plan in place for your estate. I routinely advise my clients to create a plan sooner rather than later and I provide referrals to competent estate planning attorneys for them to interview. Whether you are starting from the beginning, or you think it’s time to update your will, I’d love to help you with your estate planning.
To start, you can learn more about the value of estate planning in this whitepaper. When you’re ready to discuss what you read or review your estate planning needs, you can reach me by phone at (301) 739-8505 or by email at [email protected].
About Scott
Scott Ford is CEO, Founder and Wealth Advisor of Cornerstone Wealth Management Group, serving entrepreneurs, business owners, executives, and their families. The firm specializes in business liquidity strategies and SBA financing strategies. It is Scott’s mission to help his clients pursue financial freedom and live a balanced and fulfilled life.
Scott is a Wealth Advisor and Registered Financial Consultant (RFC). He was recognized as one of the 20 Rising Stars of Wealth Management by Private Asset Management Magazine in 2008 based upon assets managed of $1 million or more per client. Since 2005, Scott has been an active financial technical analyst.
Clients often choose to work with Scott because of his experience with the challenges business owners and executives face as well as his firm’s disciplined process. His personal and proactive approach is designed to bring clarity and simplicity to the complex issues of financial management. For over 20 years, he has been helping his clients define and pursue their own unique version of “True Wealth.”
Scott is the author of three books: Financial Jiu-Jitsu: A Fighter’s Guide to Conquering Your Finances, The Widow’s Wealth Map: Six Steps to Beginning Again, and the New York Times Bestseller, The Sustainable Edge: Fifteen Minutes a Week to a Richer Entrepreneurial Life.
He and his wife, Angie, reside in Hedgesville, WV and have two wonderful children as well as a dog and a cat. In addition to spending time with his family, Scott is a voracious reader and enjoys woodworking, Brazilian Jiu-Jitsu, golf, hunting, permaculture and beekeeping; basically anything outdoors.