A stark reality that we all come to face at one time, or another is that we will die. If you were not expecting such a bleak introduction to today’s blog post, I apologize. However, I couldn’t think of a better way to start discussing estate planning. Estate planning is the process where you determine how your assets will take care of you while you are alive and who will receive your property and assets if you either pass away or otherwise are unable to make decisions for yourself. Make no mistake- whether you are old, young, rich, poor, or somewhere in the middle you need to have an estate plan.
The question that we need to cover today is how you get from Point A where you have a suspicion that you need some help when it comes to planning for end-of-life situations to Point B where you have successfully attended to that matter. A hope and a wish won’t get you there. Neither will reading hordes of blog posts like this one. Information is a good thing, don’t get me wrong. However, you can start to get paralysis by the analysis if you catch my drift. Inaction is not good no matter if it is due to having no information or having too much.
Today’s blog post from the Law Office of Bryan Fagan hopes to thread the needle between these two opposite ends of the spectrum. I think the perfect place for you to begin the process of learning about estate planning is to take the component pieces of it and look at them carefully so that you understand what estate planning is and how you can be proficient in how you approach it. Make no mistake, estate planning can be complex and difficult for you and your family. Certainly, nobody would argue that it is a pleasant subject to discuss. However, let’s put on our grown-up pants and get after it.
Don't turn estate planning into something more than it is
There are two ideas that I want to cover before we get into our topic today of estate planning. The first is that many people assume that estate planning is only for rich people with a lot of property. We see estate planning as something out of a movie that involves big houses, a successful family, and all the trappings of wealth. The reality of the situation is that most of us are not wealthy and even fewer measure up to the sort of wealth that we associate estate planning with from television and movies.
Most of us out in the world do have some assets. We have an income, property, a home, and maybe some debts. That's normal. Estate planning is for normal people just like us. It's not something to be fearful of or avoid. Rather, estate planning is like anything else that we encounter in our lives- a process. If you take the process from a 30,000-foot perspective, then it can look daunting. However, in today's blog post we are going to approach estate planning in some basic, components parts. That way we can familiarize ourselves with each so that we do not feel overwhelmed or otherwise unable to handle the steps involved.
The better you understand what you are going to be approaching when it comes to estate planning the more willing you will be to participate. I would never recommend that you engage in a process that you do not understand. That would be like investing in something that you have no clue about. It would be risky at best and disastrous at worst. Rather, why not learn about this process as best you can and then make decisions for yourself that suit you and your situation? This is a much better option than doing nothing.
Do you know what you own?
An essential part of estate planning is knowing what you own, or as scholars say, “the extent of your bounty.” Your estate represents your property and debt that you are responsible for or own. That is the property that could pass on to your heirs or beneficiaries under a will if it does not have to be sold to pay debts that you owe. While Estate Planning is not solely about property, figuring out what it is that you own it is often the first step many people take when they are trying to begin the estate planning process. You may be surprised to learn what it is you have in your life that is worth planning for.
Personal property is anything that is not real property. It includes those things that are not attached to the ground. More commonly, it is usually those things that we can be picked up and carry away. The most significant types of property are things like real estate including our homes. These are also probably our most significant and valuable assets in terms of dollar value. The family home, at least, carries with it a certain amount of emotional value in terms of it being the place where you raised a family and have many memories tied up within it. For this reason, deciding what happens with your family home after you pass away can be a difficult concept. For anyone married, often the home would simply be left to the co-parent and spouse. However, if you are a childless single person who owns a home then you have some decisions to make in terms of what happens to that house as far as your estate plan is concerned since your property would likely be inherited by your parents.
Anything with wheels and a motor should also be considered when it comes to your personal property. I am talking about your vehicle including your car and vehicles that you may own for recreation or as a hobby. While these are assets that do not necessarily increase in value over time, they certainly are assets, nonetheless. As a result, you should pay close attention to determine what happens with these property items.
Just about everything else that you own would fall into the category of personal property. This could be the personal property that you own in your home including furniture, collectibles, family heirlooms, and home décor. Doing something as simple as walking around your home to video record each room to document the contents of each location of the house is a great idea period from there, you can begin to make a plan for how these items should be distributed upon your passing and taking it into account for estate planning purposes.
You also own what could be called intangible assets. These are things that you cannot put your hands on but that you own, nonetheless. These include items like checking and savings accounts that you probably utilize every day. While I wouldn't think that you would outright forget about these items sometimes, we overlook the things that are most readily used by us or most common. Surely an example of this would be your credit or savings accounts. Many times, these types of accounts can even bypass probate if you include payable on death components to the accounts period to do so you simply have to select a person that you would like the accounts that go to upon your passing and inform the Bank of that. The bank, credit union, or other financial institution would have you sign a form designating the pay-on-death beneficiary. That way, the contents of these accounts could pass directly to your beneficiary without first having to go through probate.
Next, we can consider traditional investments like stocks, bonds, mutual funds, and other items like these. You may have this investment stored with an investment advisor or even with a brokerage house. Much in the same way as bank accounts, many investments like these can bypass probate if you include beneficiaries with each. You should ask your investment advisor or the brokerage firm that house your funds to determine whether this is possible. If at all possible, you should seek to do what you can to bypass the probate process. While in some cases probate is necessary it can also be expensive and time-consuming. If you can limit the amount of time that your beneficiaries or heirs must wait to receive property from you then that would certainly be for the best.
Currently, we probably also need to say a word about cryptocurrency and make sure that you provide how you would like cryptocurrency to be dealt with for end-of-life planning. Admittedly, much cryptocurrency could be treated like any other piece of property. You could note the location of the cryptocurrency in any other identifying information that a beneficiary would need to be able to access the funds upon your passing. You can talk to your investment advisor if any other material would be needed to provide for the safe and effective transfer of cryptocurrency in the event of your passing. Understandably, security for digital currency it's critical and you will want to do what you can to be able to ensure that the money stored online can be passed to heirs and beneficiaries safely.
You may have also accumulated various life insurance plans over the years and that can add up to serious value for the beneficiaries of those accounts. Much like we see with other types of investments and bank accounts, life insurance policies do not go through probate. The entire point of a life insurance policy is for the beneficiaries of those accounts to be able to get access to the funds relatively quickly after your passing. One thing I will note to you is that you need to be able to update the beneficiary on these accounts based on life changes. Divorce and death should cause you to go back and look at these life insurance policies to determine if a change to the beneficiaries needs to be made. The last thing you want to do is to pass away with a life insurance policy naming an ex-spouse as a beneficiary instead of a current spouse or your children.
Figure out the value of your property
As a law office that primarily focuses on issues regarding family law, the Law Office of Bryan Fagan gives similar advice to our family law clients when it comes to inventorying and appraising their property. Some of you may be familiar with the appraisal process when it comes to a home, for instance. They are, you will be presented with an appraisal of the home you plan on selling or purchasing. That appraisal will go a long way to determining whether a mortgage lender will decide to lend money to the purchaser. That is a formal procedure that carries with it a great deal of weight. However, in the world of Estate planning being able to estimate and appraise your property is still important even though it will be informal.
For example, gaining an understanding of what your house is worth can be important because it is likely your most significant tangible asset. You can hire an appraiser to come in and perform a formal appraisal just like would be done in home purchase or sale. However, you can also save yourself some money and simply log online to see what the various home-selling websites tend to believe your house is worth. Additionally, you are undoubtedly familiar with how property taxes are based on personal residences. Usually, however, the county appraisal district will not provide you with and all that accurate estimate of the value of the home unless you have sold it recently.
Appraising the value of other assets like financial accounts can be simpler. All you would need to do in those situations would beta check online and see what the asset is worth. Then you can take that into account when determining an overall net worth and value for your property. At this point, you may be wondering why it is important to estimate the value of your property. The reason why I recommend to people that they estimate the value of their property and get a roundabout figure for the assets that they own is that this way you can better determine how you want your property to be divided. For many people, you want to divide the property evenly between children or other potential beneficiaries. You can remove the property that would automatically go to your spouse such as a vehicle or home and leave the rest to other people that you have in mind. The choice is up to you.
Take into consideration the specific circumstances of your family
Ultimately, estate planning is a process that requires you to consider the unique circumstances that your family finds itself in. No matter what your family is composed of or who is in it, your family is unique, and the needs of your family must be looked at seriously before you can determine how best to divide the property. One of the most important parts of this discussion when it comes to children under the age of 18 is making sure you have a guardian listed for them if you pass away. If your spouse is still living when you pass away, he or she would be the presumed guardian of your children as a parent. However, this is a rebuttable presumption. The same would be true even if you are divorced from your co-parent. In certain circumstances, a parent may not be the suitable guardian of a minor’s person or property.
However, if both you and your spouse were to pass away simultaneously there will be a question of who would take care of your children in that event. You should begin to think about who is best suited to take on this responsibility. Having a discussion with your spouse about this subject is a healthy one to have. The two of you can go over your concerns and your thoughts and decide about how you want to proceed. Importantly, it is a great idea for you to make sure you get in touch with the person you are interested in naming as a guardian. That way everyone can be on the same page and he or she will not be named his guardian without having first been consulted. This might seem like common sense, but it is an issue that my wife and I have tackled in our own lives that I think bears mentioning here.
Finally, it is a good idea to be as thorough as possible when it comes to your wishes for your children after your passing. In many events this ends up being you setting up a testamentary trust for the children that would go into effect should you and your spouse pass away at the same time. This would contain instructions on how money should be spent on the children and general provisions for caring for them. Remember your estate plan is your plan alone and you can be as specific as you would like in what you include. The more specific you are will probably end up being better off for you and your family down the road.
Questions about the material contained in today's blog post? Contact the Law Office of Bryan Fagan
If you have any questions about the material contained in today's blog post, please do not hesitate to contact the Law Office of Bryan Fagan. Our licensed estate planning attorneys offer free of charge consultations six days a week at our three Houston area locations, over the phone, and via video. These consultations are a great way for you to learn more about the world of estate planning and how your family may be impacted positively by your acting in this area of your life.
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