Investing Specialists

Get Your Estate Plan in Gear

Christine Benz

Note: This article was originally published on Dec. 15, 2017.

When Ginnie and Alan wrote me to request a portfolio makeover, they were feeling nervous about their portfolio's ability to last through what they hoped would be a long and fruitful retirement. But this couple wasn't thinking only about themselves. As parents of a daughter with special needs, they were seeking guidance on what to do to ensure that their child would be able to remain independent and have enough money to cover her needs. Their 20-something daughter was employed and living on her own nearby, but she relied on them for ongoing financial support.

I gave them my ideas on how to improve their portfolio, and I also suggested that they consult an attorney about setting up a special-needs trust. But I stopped short of providing them with specific guidance on their leaving a legacy for their daughter--even though I have a special-needs loved one in my life and feel somewhat knowledgeable about the topic.

While I strongly believe that you can tackle many aspects of financial planning on your own, without the assistance of a professional, estate planning--the process of distributing one's assets after death--isn't one of them. True, it's not hard to find do-it-yourself wills and other estate-planning materials on the Internet. But the topic is extremely complicated, and the right solution is specific to each individual. The tax laws related to estate planning have also undergone swift changes during the past several years and may change again in the years ahead, too. (As of this writing, Congress is close to passing a tax package that will have significant ramifications for estate planning.)

That fast-changing landscape means that if you're creating or updating an estate plan, it's essential that you seek the advice of an attorney who's well-versed in the key issues. Not only can a professional ensure that your assets are distributed and that your healthcare proceeds in accordance with your wishes, but he or she can also do so with an eye toward reducing the tax burden on those assets.

Of course, any time you hear the word "attorney," it's natural to worry about the costs you'll rack up. You might be tempted to postpone creating an estate plan, assuming that you need to have a lot of assets to make the process worthwhile. Alternatively, many individuals wait until they have children to create an estate plan. But everyone--regardless of life stage or the size of their portfolio--should think about hiring an attorney to draft the basic estate-planning documents: a will, a living will, and powers of attorney.

Before you hire an estate-planning attorney to draft or update your estate plan, it's important to understand your role in the estate-planning process. Your estate plan will be most effective if you spend some time at the outset finding the right attorney for your needs and thinking through what you're trying to achieve as well as whom you trust to see your wishes through.

Here are the key steps to take.

1. Find a qualified attorney.
Because your estate plan will likely need to be updated as the years go by and your personal circumstances change, it makes sense to find an attorney who practices in the community where you live. That way, you can meet with him or her on an ongoing basis if need be.

Start by asking friends and colleagues for referrals. If you have a specific situation that is likely to affect your estate plan--for example, if you're a small-business owner or if you have a special-needs child--it's ideal to seek referrals from other individuals who are in a similar situation. Other professionals in your life--whether accountants or financial advisors--can also be great resources.

Before you select an attorney, it's perfectly reasonable to conduct a basic informational interview. (If the attorney is unwilling to answer these questions without charging you, that should be your cue to move on.)

Ask the following:

  • How long have you been practicing law?
  • How long have you been practicing this type of law?
  • How many estates have you settled?
  • What is the typical asset level for your clients?
  • Do you have experience with situations like mine? (Blended/divorced family, business owner, special-needs child, child with chemical dependency, etc.)
  • How do you charge for your services? What is an estimate of the charges for my estate plan?
  • Do you have experience with tax planning? (Particularly important for large estates)

As you speak with a prospective estate-planning attorney, also weigh the intangibles. Do you like this person, and would you be comfortable supplying him or her with personal information about your finances and family situation?

2. Take stock of your assets.
Before you meet with your attorney, spend some time enumerating your assets and their value: your investment accounts as well as life insurance, personal assets such as your home, and your share of any businesses that you own. Also gather current information about any debts outstanding. Your estate-planning attorney is likely to provide you with a worksheet to document your assets and liabilities, but it's helpful to collect this information in advance. You can use our Master Directory template to help guide your information-collection efforts; the directory is also valuable as an ongoing resource.

3. Identify key individuals.
Another important aspect of estate planning is identifying the individuals you trust to ensure that your wishes are carried out once you're gone. You'll need individuals to fill the following key roles. (Note that the same individual can fulfill more than one role.)

Executor: A person who gathers all of your assets and makes sure that they are distributed as spelled out in your will. This person must be extremely detail-oriented and comfortable with numbers and should also be able to find the time to work on your estate. Many people call upon family members to serve as executors, but it's also possible--and in some cases desirable--to hire a professional (such as a bank trust officer) to serve as your executor.

Durable (or Financial) Power of Attorney: A person you entrust with making financial decisions on your behalf if you should become disabled and unable to manage your own financial affairs. It's important that this person understand your general wishes, in this case about your financial affairs. Your durable power of attorney should also be detail-oriented and adept with financial matters. Your documents should specify when the durable power of attorney would go into effect--upon your incapacitation, for example.

Power of Attorney for Healthcare: A person you entrust with making healthcare decisions on your behalf if you are disabled and unable to make them on your own. Ideally, this is a person who lives in close geographic proximity to you and who also understands your general wishes about your own healthcare.

Guardian: A person who would look after your children if you and your spouse were to die when your children are minors. That's unlikely to happen, of course, but it's still important to give the decision due consideration. You want your child's guardian to share your and your spouse's values and views on parenting, and it's also important that the guardian you choose be willing to raise your kids if called upon to do so. Financial wherewithal and acumen should also be considerations.

It's possible to designate two guardians--one to look after your children and another to look after your children's financial assets--although that's usually not desirable because the two guardians may disagree on various matters.

4. Know the key documents you need.
When you meet with your estate-planning attorney, he or she will make recommendations about your estate plan and that, in turn, will determine which documents you need. At a minimum, however, you should ask your attorney to draft the following:

Last Will and Testament: A legal document that tells everyone--including your heirs--how you would like your assets distributed after you're gone.

Living Will: A document that tells your loved ones and your healthcare providers how you would like to be cared for if you should become terminally ill; usually includes details about your views toward life-support equipment. (Called a "medical directive" in some states.)

Medical Power of Attorney: A document that gives an individual the power to make healthcare decisions on your behalf if you are unable to do so.

Durable (Financial) Power of Attorney: A document that gives an individual the power to make financial decisions and execute financial transactions on your behalf if you are unable to do so.

5. Manage your documents.
Once your estate-planning documents are drafted, destroy any older versions of them. You must also keep the documents in a safe place, either in a home safe, in the top drawer of a secure file cabinet in your home, or in your safe-deposit box. The downside of storing these documents in a safe-deposit box is that your loved ones may have difficulty accessing them in the event of your death or incapacity.

Notify your executor of the whereabouts of your estate-planning documents, and provide copies of the relevant documents to your executor, powers of attorney, and the guardian for your children. When you hand off these documents to your various agents, it's also a good time to discuss your wishes with them. Creating a master directory can provide your heirs with an invaluable overview of your assets and accounts; just be sure to keep it in a safe place. 

6. Plan to keep your plan current.
Last but not least, plan to keep your estate plan current. One of the biggest estate-planning pitfalls is drafting an estate plan but not bothering to keep it up to date. Plan to notify your estate-planning attorney, and possibly revise your documents, as well as your beneficiary designations, if you experience any of the following:

  • Change in marital or family status (marriage, divorce, birth, or adoption of child)
  • Major change in assets--either sale or purchase
  • Major change in financial status
  • Death or ill health of one of your beneficiaries
  • Death or ill health of executor, power of attorneys, guardian