Every individual’s estate plan looks different based on life stage, financial goals and, importantly, a family’s culture and traditions.
According to WealthCounsel‡, 35% of adults in the U.S. say they or someone they know experienced familial conflict due to not having an estate plan in place. Below are some key areas to explore as you review your estate plan to help ensure you and your family avoid potential tension during vulnerable times.
How to get started with your estate plan
Before you create or update your estate plan, take inventory of your financial assets and liabilities so you and your advisor have a good understanding of what assets you have to account for. Your estate plan should include everything that makes up your net worth, including real estate, possessions, financial securities, cash and other assets that you own or have an interest in.
Once your assets are identified, determine your financial goals and wishes for your legacy– clearly identify why you are creating your estate plan. It’s recommended you create an estate plan once you become a legal adult, at the age of 18 in most jurisdictions, and that you update the plan every three to five years. However, for many, life events like having your first child, retiring or the unexpected passing of a spouse trigger the need to create or update an estate plan.
As you discuss your assets with your advisor, look beyond tangibles to take into consideration the values you’ve built with your family. What connects you, what inspires you and how do you dream of your family legacy continuing? These more abstract concepts are critical in the creation of an estate plan that gives you confidence in how you’ll support and/or benefit your family when you’re gone.
How to reflect and protect your wishes in your estate plan
The first step to ensuring your estate plan reflects and protects your wishes is to select a trustee or personal representative/executor, who will execute and implement your estate plan. There are two types of trustees: individual and corporate. An individual trustee is typically a trusted friend or family member. Choosing an individual trustee can be a less expensive option if the individual elects to receive no compensation for their service. However, individual trustees may lack the time, resources and expertise to manage your trust/estate, which could result in the need to hire outside counsel or other advisors and experts to assist.
For these reasons, some choose to appoint a corporate trustee or personal representative to manage their trust/estate. Corporate trustees are financial institutions that are granted fiduciary powers by federal or state bank regulatory agencies. A corporate trustee must ensure it follows all relevant regulations and state mandated fiduciary duties while working to carry out your wishes.
You may also want to consider the appointment of multiple parties as co-trustees. As an example, many will appoint both a corporate and individual trustee to work together. The corporate trustee brings expertise, processes and systems to ensure all technical requirements are satisfied, while the individual trustee can bring greater depth of knowledge about your wishes and goals and the needs of your beneficiaries.
Considerations when choosing your estate trustee
There are many considerations when selecting a trustee. You should consider the skills and expertise required to manage your trust/estate. This will depend on the types of assets involved, the complexity of the plan you wish to put in place, and any special circumstances that could impact the administration. For some, the location of the trustee can be an important factor as they want to make sure their family will have quick access to their advisors. The cost of services may be another important factor. For others, a trustee’s religion or beliefs, background, or knowledge of family dynamics could help decide who is the right fit. It can be important to some to make sure cultural beliefs and traditions are reflected in the estate plan and finding someone with both technical expertise and a similar background could be beneficial to the success of your plan.
How to involve your family in the estate planning conversation
Deciding whether or not to involve your family in the estate planning process is a personal decision. In some instances, discussing finances with family is still considered taboo and can vary based on your financial history, family dynamic and varying levels of interest in finances.
If you have named individual beneficiaries in your estate plan, it can be helpful for them to know and understand your goals and intentions. Sharing the details of your estate plan with impacted loved ones may also help ensure your wishes are met. If you do decide to discuss your plan with your family, invite your financial advisor and corporate trustee to help explain the process and answer technical questions.
As you establish and adjust your estate plan over time, be sure to consider both the financial elements of the plan and the legacy you hope to leave for your family or your community. Engaging an experienced corporate trustee can help as you design your estate plan and can support you when you need family communication and education.
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