Estate planning isn’t just about drafting a will. In fact, for some families, this can be more bothersome than helpful. True estate planning ensures your wishes are met and that everything you own goes exactly where you want it to go in the most efficient way possible.
If you’ve reached a point in life where you think you need an estate plan, you’re probably right. And if you’re in that place, your next step is to ask yourself these questions:
- What will happen when I die?
- What do I want to happen?
- What can I do about it?
Like most meaningful goals, your desired legacy won’t come to fruition on its own—it requires forethought and intentional planning. Here are four keys to crafting an estate plan that aligns with your desired outcomes:
1.) Plan For Probabilities
When it comes to financial planning, people tend to focus on their “worst-case scenario.” This is helpful to a point, but it shouldn’t distract you from planning for your most likely outcome. For example, you may be concerned about exorbitant nursing home bills because that would be the most difficult outcome for you, but if you’re relatively healthy and have a spouse who’s 15 years younger whose only income after you pass will be your Social Security payments, it’s probable that their wellbeing will become the central financial issue—not your potential nursing home bills. So plan accordingly.
2.) Keep Taxes in Perspective
Estate planning is a scenario where the “death and taxes” adage rings particularly true. There are strategies to alleviate the tax burden on your estate (e.g., life insurance policies that cover a tax liability), but it’s important to identify your unique tax risks before taking steps to counteract them. We’ve known people who created present-day tax liabilities in efforts to avoid estate taxes, when a hefty estate-tax bill was a relatively low probability for them. That’s not to say you shouldn’t plan for taxes—but consider the impact on your own situation before accepting blanket tax-saving advice.
3.) Don’t make assumptions.
Sometimes, there is a stark difference between what you expect will happen with your assets when you die and what actually happens. So don’t assume everything will simply “work out” the way you want it to. Take the “Cinderella effect,” for example—maybe you’ve remarried, and you assume that your only child will receive her fair share of the estate when you pass, but instead, your spouse and stepchildren end up with the lion’s share. It’s simple, seemingly common-sense wishes like these—for a daughter to get her fair share—that often go unfulfilled because someone assumed they would “work out” without a plan.
4.) Focus on what matters to you
The most important aspect of estate planning isn’t minimizing taxes or reducing long-term care costs—it’s identifying what’s important to you and making it happen. That’s why it’s crucial to work with an advisor who takes time to listen and understand your wishes, rather than offer generic advice. We had a client who was married with six children, and he told us that if he passed away before his wife, he wanted everything allocated to her care. That was his number one priority—not the kids, grandkids, or a charity. So as his advisors, that became our number one priority.
A well-thought-out estate plan can also include strategies to protect your family’s privacy, ensure your beneficiaries have access to the resources they need at the proper times, and keep money out of the wrong hands. But most importantly, a thorough estate plan gives you confidence that what you want to happen after you pass will actually happen. It takes your final wishes and turns them into an actionable plan for peace of mind.