Hakuna Matata is NOT an Estate Plan
The Lion King would be a relatively short movie if only Mustafa created a proper estate plan!! Needless to say, taking a “No Worries” approach to your estate plan is not a wise idea. Especially if you want to implement your version of a ‘problem-free philosophy’.
We have all heard the line before, "the only guarantee in life are death and taxes". Hopefully y'all have those tax returns filed, or at least extended. So now is the time, according to my Annual Service Calendar I like to shift the focus on reviewing estate plans.
Before I continue any further, I feel I am legally required to inform you I am not an estate attorney, nor do I ever plan on becoming one. Estate Laws are governed state-by-state and are based upon your domicile (i.e. legal home). To ensure your estate plan is legally up to date, please consult with your local legal expert.
Now back to the show...
During my time as a Retirement Plan Advisor (RPA), I was meeting with a prospective client, we'll name her Susie (not her real name). It was my role as an RPA to review Susie's workplace retirement plan and investment strategy to ensure Susie was on track to retire successfully.
Well...
Our first meeting went off the rails rather quickly. After our introductions, I brought up Susie's retirement account to do a quick overview to ensure all general information was up to date. You know, simple information like phone, email, address, contribution amounts, and lastly BENEFICIARIES. This whole process was intended to take no more than a minute or two, except it turned out Susie still had her ex-husband listed as her primary beneficiary in lieu of her two children.
I knew nothing about Susie's divorce, but judging by her reaction when I said the ex's name, I can guarantee the divorce did not end amicably. I'm not one to wear jewelry, but if I did, I would be clutching my pearls at the language that was coming out of Susie's mouth.
Now before you jump to the heroes’ defense here, Susie was clearly angry at the situation not at yours truly. And I appreciate your concerns for my safety, but Susie's response was absolutely warranted. Mostly by the path of 'what ifs'.
What if Susie unexpectantly passes, and...
What if Susie's ex is remarried, and...
What if the ex's new marriage includes children/stepchildren, and...
What if Susie's ex unexpectantly passes without updating his beneficiaries...
Under this hypothetical pathway, Susie's children might not see a penny of Susie's retirement account. Years of Susie's hard work, diligent saving, and delayed gratification would not pass along to the people she cared most about. Her retirement account would leave her bloodline simply due to not following through on a simple administrative process.
Susie and I spent the entirety of our hour-long meeting reviewing and updating beneficiaries of her retirement account, pension, bank/investment TOD accounts, life insurance, and much more. We didn't accomplish anything on our initial agenda guiding towards retirement readiness, but we did accomplish what we needed to accomplish in providing comfort to Susie's overall financial well-being.
My meeting with Susie was an absolute success. I'm sure many of my attorney and advisor friends out there have similar horror stories where such a minor oversight created a huge mess upon a client passing. That is why creating and periodically reviewing your estate plan is a crucial part of the financial planning process. And a core component of the CFP® Board of Standards Financial Review Process.
Estate planning isn't just about death and taxes (although those are important!). It's about ensuring your wishes are carried out, minimizing stress for loved ones during a difficult time, and potentially reducing taxes. Beneficiary reviews, like the work I completed with Susie, are just the tip of the iceberg when it comes to checklists and workflows financial planners can do in partnership with your estate attorney. For example…
When CREATING an estate plan, we may want to investigate:
General Issues: Establishing last will and testament, appointment of legal guardian for minor children, legacy/gifting strategies, medical preferences, funeral expenses.
Asset Issues: Asset liquidity, taxability of accounts, digital assets, personal assets.
Probate & Transfer Issues: Titling of assets (JTWROS, TIC, TOD), Strategies to avoid/limit probate.
Other Issues: Leaving a portion of estate to charity, federal/state estate tax liability, heirs who have special needs, any state-specific issues (e.g. community property, TOD/POD restrictions, probate laws).
When REVIEWING an already established estate plan, we may want to investigate:
Threshold Issues: Changes in residency, changes in laws since last update, confirm/sharing location of documents ensuring accessibility.
General Power of Attorney: Are powers effective immediately or are they "springing", review appointed agent(s) and their capacity, confirm successor agents are good back-ups.
Health Care Power of Attorney: Review appointed agents, are agents readily available locally, have you expressed wishes regarding end-of-life treatments.
Last Will and Testament: Review Executor/Personal Representative, Consideration of testamentary or living trust if you have minor children, the transfer of any tangible personal property.
Revocable Living Trust: Review Trustee/Co-Trustee appointments, Beneficiaries with special needs.
Irrevocable Living Trust: Review types of trust (e.g. ILIT, CRT, CLT, SLAT, GRAT, QPRT) Confirm tax returns are properly filed, confirm actions are consistent with terms of the trust.
Miscellaneous: Premarital agreements, ensure non-probate transfers (TOD/POD, beneficiary designations) align with overall estate plan, Concerns about future will or trust contest.
While this list provides a helpful starting point, it's important to remember that estate planning is complex and varies by state. I'm not a lawyer and cannot create or modify legal documents. However, I can be a valuable resource to partner with you through the process.
Estate planning is an important step in securing your financial legacy. While this blog post provides a general overview, it's crucial to consult with a financial advisor and estate planning attorney to create a personalized plan that meets your specific needs. Let's work together to ensure your wishes are known and your loved ones are protected.
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