Congratulations!
You've been meaning to create an estate plan for a long time -- and now you
finally have a health care advance directive, a durable power of attorney, a
will and maybe even a revocable trust.
You've
accomplished something important for you and your family, but you are not done
yet. Here's what you need to do to maintain your estate plan:
Review
Asset Ownership
Your
estate plan should take into account how you own your assets. You want your
loved ones to have easy access to your assets in the event of an accident,
incapacity or death. Depending upon your estate plan and your circumstances, perhaps
your accounts should be owned jointly with a loved one. You might also add your
attorney-in-fact (named under a durable power of attorney) to be an authorized
signer on your account. Or, if you created a revocable trust, you probably
should consider transferring ownership of most of your individual financial and
investment accounts, and perhaps other assets as well, into the name of your
revocable trust.
The
takeaway here is that your asset ownership plan is an integral part of the
estate plan that needs to be taken into account.
Check
Your Beneficiary Designations
Many
assets pass upon death by beneficiary designations. These assets include
retirement accounts -- like IRAs and 401(k)s -- life insurance policies and
annuities. Most major financial institutions now allow you to name a
beneficiary on non-retirement investment and financial accounts as well, which
is known as TOD (or transfer on death).
It's
always best to periodically check these beneficiary designations to make sure
they accurately reflect who you'd like to receive a particular asset upon your
death. Incorrect beneficiary designations are a fairly common occurrence -- and
mistakes can be costly to fix after someone dies, if they are even possible to
fix at all.
Is
Your House Your Homestead?
Many
states allow you to declare your primary residence as your homestead. Depending
upon your state of residence, there can be many advantages to declaring your
homestead, such as creditor protection or lower property taxes. Homestead
benefits vary drastically by state, and it's possible they can have an effect
on who can inherit, as well. It's best to consult a local adviser to help you
figure out if a homestead is worthwhile in your state.
How
Long Will Your Estate Plan Last?
Your
estate plan will likely need to be updated at some point. An estate plan
represents a snapshot of your life at the time you create the plan, in
conjunction with applicable laws then in effect. As time marches on, changes in
your life (or the law) can affect your estate plan. Therefore, it's important
to periodically review your estate plan to make sure it's still appropriate.
Perhaps someone you named in an important role, such as Executor or Trustee has
become sick or you no longer are close with that person. Perhaps one of your
loved ones is getting divorced, has creditor issues, or has become disabled. A
whole variety of things can happen to necessitate updating your estate plan.
A good
rule of thumb is to review your estate plan every five to seven years or
whenever you've had a major life or financial change, such as a divorce or the
birth of a child or even your parent has passed away and you are receiving an
inheritance. You should review your plan with an attorney who can advise you
what, if any, changes may be necessary.
What
Happens if You Move to a Different State?
This is
a fairly common question. The good news is that a valid document (such as a
will, durable power of attorney, health care document or trust) in one state,
is also a valid document in another state. However, the particular document
might not contain all of the necessary provisions in the new state, and
therefore, the document might not work as well or as expected in the new state.
For example, the state you live in might not require that a power of attorney
be signed in front of witnesses, while your new state does require witnesses.
This means your power of attorney might not work in the new state when you need
it most. Therefore, if you move to a new state, it's always best to have your
estate plan reviewed for possibly helpful or necessary updates.
Where
Should You Keep Original Documents?
You
should keep your original documents somewhere safe, yet accessible, like a
locked safe in your home or perhaps with your attorney, if he or she is willing
to hold on to it for you. In most cases, you should avoid keeping the originals
in a bank safe deposit box, unless someone other
than you and your spouse is a co-signer. A court order is necessary to obtain
an original will from a safe deposit box after someone dies if there is no
co-signer. For health care documents and trusts, originals have become less important.
Copies
typically work that same way as an original. However, when someone passes, an
original will still must be filed with the court. Although, with extra
paperwork, time and effort, it's usually possible to get a court to accept a
copy of a will. Durable powers of attorney are really the exception to this
trend. You often need an original power of attorney to be able to use it. So,
mind your originals. That way you have them when you need them.
Who
Should Have Copies?
In
addition to your originals, you should have a fully executed copy of your
estate plan (including a digital copy). While copies may have a more limited
use than originals, they are important to have so that other family members
know what their roles are when the time comes. In addition, if provided copies
of your documents, the family will know your intentions and not be surprised by
the terms, which could limit future fights.
Consider
giving a copy of the documents to the people with important roles in the estate
plan (such as executor, trustee, health care agent and power of attorney). If
you are uncomfortable doing so, at least make sure the named people know their
roles and who to contact if something happens to you. Some people (but not
most) gives copies of their plan to their children. The most important thing is
that your loved ones know who is charge if something happens to you and where
to find the documents to ensure the plan you've taken the time and energy to
create can be properly implemented.
You've
done the hard part, so don't stop now. Periodically review your estate plan to
make sure everything is still in order, and if not, make the necessary changes
with your attorney. A little routine maintenance will go a long way toward your
goal of ensuring your loved ones are taken care of when you're gone.
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This
article was written by and presents the views of our contributing adviser, not
the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
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