Estate Planning On My Mind

We’re all going to die!

There’s no sense in pretending we’re immortal. And even the most ardent minimalists among us collect possessions and money, and that needs to go somewhere when the end comes.

Not to mention those with families – what’s the plan for your assets and liabilities if you were to pass? How will things be handled? Who will take care of any spouse and children you left behind?

Passive Income MD has had estate planning on his mind lately, and he shares some items to consider as you embark on your own planning in this guest post.

 

 

Thinking about your own mortality is no fun. Personally, it’s not something I often consider. I’m usually too busy trying to figure out how to live the most extraordinary life possible.

However, estate planning has been on my mind. Honestly, I’ve been thinking about it a lot more these past few weeks.

Of course, even before everything that has happened with the coronavirus, one of my big goals for this year was to get all of my estate planning in order. Still, it’s safe to say that recent world events have maybe bumped the priority up a couple of notches.

Now, don’t get me wrong – I expect to live a long life. I’ve taken certain steps to improve my own health. I exercise and have begun to eat better so that I’m around for my family as long as possible. I can’t control everything, but the things I can control, I’m making the best of.

My efforts at living a longer, healthier life, however, have brought to light the inevitability of death. I’m in my 40s now, and sadly, I’m starting to see friends from school starting to deal with major health issues or involved in serious accidents. I don’t know if that feels like it’s happening more and more to you, but I’ve certainly noticed it.

The old adage holds true, though: death is simply a part of life. Having fear or anxiety about death may not be healthy, but I’ve certainly seen what happens when families aren’t prepared for that moment.

So, I vowed not to let those same things happen to my family.

estate planning in preparation for difficult times and loss of mortality

My goal is to get everything in order just in case something happens to me. That way, I can rest assured that even if the worst happens, I know my family will be taken care of. If you share that goal, you might be interested in some of the major considerations I’ve been tackling.

 

Living Trust

 

A living trust is simply a set of instructions for what happens to your assets after you pass.

I always thought that a living trust and will were synonymous but as it turns out, they’re pretty different.

A trust allows you to assign a trustee, or someone who will handle your assets on behalf of your beneficiaries. You do still give instructions for how those assets are distributed, though, much like a will.

However, a trust has three main advantages:

First, it allows you to avoid probate court. With a will, the court still needs to go through the process of transferring your assets to your beneficiaries. However, with a trust, even though you’ve passed, your trustee can facilitate the distribution of assets. Probate court can take a while and is notoriously expensive (sometimes up to 2-3% of your assets are paid in fees!).

Second, with a living trust, your assets can be transferred privately after your death. Contrast this to a will, which is a public document, and all transactions are public as well.

Third, a trust can take effect in situations other than death. For example, if you’re mentally incapacitated, your trustee can be the one to take over, rather than someone the court appoints.

A will, however, is useful for assigning guardianship of your children in case something happens to you. Without a will, guardianship would have to be court appointed.

Ultimately, of course, choosing to go with a trust or a will (or both) should be decided with the help of an estate lawyer.

I had a revocable living trust created a few years back but in reviewing things, I realized that I hadn’t moved all of my assets into the trust. I’ve since bought some rental properties and made some investments.

So I’m currently working on cleaning things up and making sure everything is housed properly under the trust.

 

Advance Directives & Medical Power of Attorney

 

As physicians, we know this area all too well. I’m sure all of us have had to address this issue with a patient at some point in our journey, whether it was back in medical school or residency.

It turns out that completing one for myself was pretty easy; I simply filled out a form that expressed my wishes. Did it once and since nothing’s changed in terms of my marriage, it’s all still the same.

 

Organization of Documents

 

Do you know the location of all of your important documents? Things like deeds, certificates, forms, titles… If you’re like me, I knew where maybe one or two of those were in my home.

I realized that this wasn’t ideal, so lately, I’ve been working on organizing my important documents and making sure they’re stored in a secure location. I don’t know about you, but I often have a hard time finding everything when I need them, so this has been very beneficial.

One thing that has really helped me organize things is the In Case of Emergency (ICE) Binder. It’s a simple set of documents that makes sure my loved ones know have all the information they need if something happens to me. Super easy to fill out and is a checklist of things so I know I’m not forgetting anything. (40% discount right now through April 15th).

But then, I decided to take it a step further and began looking for an online vault that allows me to store all this information. If you have a financial advisor, they will often have that sort of thing available to you.

For some extra peace of mind, it’s certainly worth asking for.

 

Passwords

 

In the event of your passing, have you considered how your family is supposed to get access to all of your files and documents? After all, most of us don’t share our passwords with anyone (and rightly so).

This could make it difficult for your family to have access to important documents, cloud storage, and accounts.

I like to use a password keeper like LastPass and One Password. Software like these help you to create secure, unique passwords. All of your passwords are locked behind one master password. If you share this single password with a trusted family member (or a trustee), they’ll be able to gain access to all of your stored usernames and passwords.

Of course, there’s always the fear that someone can crack that one password and have access to everything. On the other hand, if you’re like me, the only other option is to make all your passwords so similar (read: easy to remember) that they provide little-to-no security anyway.

 

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Organization of Investments

 

I like to invest in multiple different types of investments. I have stock accounts, retirement accounts, 529s, crowdfunded investments, syndications, funds, and angel investments. It can be a lot to track. So how do I keep all these documents in order?

Well, that can be a job in and of itself.

Those go in the ICE Binder as well, but I also have a simple Excel spreadsheet that outlines what the different investments are, and I update this list every time I make an investment. It’s kind of like a treasure map in case something happens to me.

 

 

 

Life Insurance

 

One of the best ways to ensure your family’s well-being in the event of your death is, of course, life insurance.

I bought my first policy ($2 million, 20 year term) when my wife and I bought our first home, and then I purchased more term life insurance ($2 million, 20 year term) the moment I had my first child.

I simply called my agent to review the terms of my policies and to make sure I was adequately covered. He said I was.

 

Disability Insurance

 

Of course, there are other things to consider besides death. If I were in an accident and permanently or temporarily disabled, for example, my family could still be in a bad situation. I made sure to plan for that contingency.

Fortunately, even if something happened and I could no longer put an epidural in, I could still (hopefully) run some of my businesses, which would provide most, if not all, of the income we would need.

Still, I consider it a very good idea to have specialty-specific disability insurance. It could make all the difference in this event. Make sure to contact an independent agent who can shop multiple policies on your behalf.

 

Thoughts on Estate Planning

Making a plan for what happens after you die is, admittedly, an unpleasant undertaking. However, it’s also extremely important – not just for your family’s well-being in a worst-case scenario, but also for your peace of mind.

Since I began taking these steps, I can say that if I were to pass on my family would be taken care of financially because I made estate planning a priority, and I hope to have made their difficult time just a little bit easier.

It’s funny, making sure that all my bases are covered helps relieve the worry of dying so I can actually enjoy life a lot more.

 

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Anything else I’m missing that I should be thinking about when it comes to estate planning? Have you made estate planning a priority?

8 thoughts on “Estate Planning On My Mind”

  1. I can vouch that settling an estate where assets were either left to the Trust or to direct beneficiaries is FAR easier than going through probate. My mother had a Trust and selling her house and disbursing assets was a breeze. My friend’s mother just had a will, which 9 months after her death is still going through probate, and the houses and commercial real estate are still unsold, incurring considerable running expenses. The court and lawyer fees will be considerable.

    The courts here are very backed up (from all the extra deaths due to Covid, perhaps). It took a full month just to get her blessed as Executor.

    Reply
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  3. I’d include a section on Trust Companies as the trustee.. Money can, and will, tear a family apart if even one person doesn’t feel that it’s fair and equitable so we’d like to avoid that and also extend our legacy to future generations.

    Reply
  4. Very good article. We had this all done when our first child was born, 15 years ago. Costed $1k with attorney. Well worth the money.

    I update our financials(retirement, brokerage, life insurance, 529, etc.) a couple of times a year. I make sure my wife knows where to access it. Our estate executor also gets a copy(without the actual dollar amount).

    I sleep well at night knowing everything is in place.

    Reply
  5. If assets are in a 401(k) would it make sense to pass them to beneficiaries or leave the 401(k) to the trust?

    Thanks!

    Reply
      • Our estate planning attorney plus financial advisor said that you should NOT put retirement accounts in the name of your trust as it’s taxed at a much higher rate, advised TOD beneficiaries that mirror the terms of your Trust. We will likely use a Trust Company to handle our Trusts so that the inherited funds are handled properly given the probable amount. Not currently set up that way but will be looking into per a recent disturbing event that happened with a family member when their father passed away. Money can, and will, tear a family apart if even one person doesn’t feel that it’s fair and equitable so we’d like to avoid that and also extend our legacy to future generations. I’d include a section on Trust Companies as the trustee..

        Reply
    • I just recently handled my mother’s estate so I got quite the education.

      Absolutely do NOT leave 401(k), IRA accounts to a trust. The trust tax rates are abominable!

      You can of course designate more than one beneficiary and differing percentages on those accounts.

      Also:
      When someone inherits your tax advantaged retirement account monies (IRAs for sure, not certain about 401(k)s) directly via an “inherited” account, they also can benefit from IRS regulations that allow the disbursement of funds over a period of time (length of time varies based on the beneficiary’s relationship to the deceased). This brings real benefit in the form of possibly lower taxation since you don’t have to incur taxes all in one tax year.

      Reply
      • Great info about my 403B
        Retirement account. I will just keep it as beneficiary and not put it in a trust.

        Reply

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