A Brief Guide to Estate Planning
Length: • 9 mins
Annotated by David Talley
A Brief Guide to Estate Planning
Published March 30, 2020
Death is unfortunately on many of our minds these days. A pandemic is sweeping the globe and has overtaken every aspect of our lives. Many of us are thinking more keenly about our own mortality as well as that of our loved ones—and understandably so, given the news. Hopefully you and yours will be just fine. But it never hurts to be prepared.
This is a lesson I first learned when my father passed away. I still remember standing in his loaded-to-the-gills hoarder’s house, where he’d told me to look in the drawer—the one painted red—in his guest-room office; there I’d find his final instructions. I opened the office door and looked at the giant poster that had graced the otherwise blank, white wall since I was a kid: It was a National Geographic map of the world, covered in push pins that represented where my dad had been and where he wanted to go. When I was a teenager, nearly all of the pins were yellow—meaning places he still wanted to visit. Now I was in my 40s, my Dad had died at age 76, and most of the pins were green: He’d done what he wanted to do.
I pulled open the drawer and saw two documents, neatly printed out. One was a series of typed addresses, names of institutions, and account numbers; it was called “Where Things Are.” The other contained burial instructions; it was called “Morbid Thoughts.”
Those documents (neither was a will, per se; that was kept in a vault at an attorney’s office) were the true maps that I needed—and they guided me through a process that almost all of us will eventually go through when a loved one dies.
My thoughts on mortality have become more acute in the early months of 2020, as the coronavirus evolves into a global pandemic that has taken many thousands of lives and will surely and sadly take many thousands more. I think about my own fate, sometimes, since I’m a lifelong asthmatic and have always been more prone to coughs and colds than the folks around me.
But let’s banish morbid thoughts for a moment. Because preparing—whether that means helping a partner get their end-of-life affairs in order, or making sure you’ve got your own final arrangements dealt with—will make life (and death) a lot easier when the time comes.
Here are the things you need to consider—whether you’re making plans for yourself or making sure your older parents are prepared.
Do I need a will?
Probably. And if you have children and property, you’ll need several will-like documents.
To be clear, a will is the document that determines what happens to your assets—the things you own. Your will determines what will happen to everything from your children to your tchotchkes, from your heirlooms to your stocks and bonds. The exception: assets that may already have a beneficiary named, like IRAs or some bank and investment accounts.
A will isn’t the only document you’ll need. You’ll also want a living will, sometimes known as an advance directive, which is exactly what the name implies: It determines what will be done with your affairs if you’re still living (but incapacitated). A living will focuses mostly on how you’d want your end-of-life decisions handled if you were unable to make your wishes known (without this, doctors may feel obligated to resort to ultimately futile, and very expensive, heroic measures to extend your life).
The other two main documents you’ll want to prepare are a durable health-care power of attorney, which names the person who will make medical decisions for you, and a durable financial power of attorney, which gives somebody the right to make legal and financial decisions for you (your parents should have similar documents).
There are other documents you may also want to consider, but the big four (will, living will, durable health-care power of attorney, and durable financial power of attorney) are the basics that everyone needs right now, says Betsy Simmons Hannibal, an attorney and editor at Nolo, which publishes do-it-yourself law guides. “It’s a good bet that your wishes don’t match up with the laws of your state,” she says. “Without these documents, the state will give whatever you have to your closest relatives as defined by statute. It’s much better for you to determine that.”
The only folks who don’t need a will are those who are very young (Hannibal says those in their early 20s) and who are single, have no assets, have no kids (or pets, in some cases), and don’t mind if everything goes back to their parents upon their death. But even then, it’s important for you to name beneficiaries on your accounts—and to have a plan (see below) for your personal digital assets.
How often should I update my will?
This is different for everyone, but your will likely will need updating over your adult life; whenever you’ve experienced a big change—the birth of a child (or another child), buying property, a shift in relationship status, even moving to another state.
My wife and I first did our wills a decade ago. We’ve since moved to a new state, had another child, and bought and sold property. If we were to die today, our wills would be utterly inadequate. They need updating.
How do I make a will? Do I need a lawyer?
There are plenty of services—LegalZoom, Quicken’s WillMaker software—that will let you create a will (and an estate plan that includes most of the documents named above) on your own. We haven’t tested these services ourselves. Many people may find them perfectly adequate. But for peace of mind, you’re probably better off seeking professional help from an attorney. This is particularly true for people that have large estates, lots of possessions, or modern blended families (which may involve kids from multiple marriages, second spouses, and scattered property). You’ll very likely need more tailored professional help than any software or DIY service can handle.
But even then, hiring a lawyer isn’t an all-or-nothing proposition: “You can have an attorney do everything for you, or just guide you with a few quick meetings, checking your work,” says Hannibal.
How do I find a lawyer? What will it cost?
The best way to find an attorney is to ask people you trust. You’ll want a lawyer who’s board-certified in estate planning, if your state offers such a certification (not all do). The National Association of Estate Planners & Councils is a group of affiliated lawyers, accountants, and other advisers who specialize in the discipline.
How much will it cost? If a lawyer is simply preparing a will and other documents for you, be ready to spend somewhere between $300 and $1,200, according to Nolo. If you’re handling the estate of a deceased loved one, expect to pay into the thousands of dollars for a moderate estate. Some estate attorneys offer a flat fee, and you’ll want to be sure what you get for that fee. Some of your tasks may be assigned to a paralegal, which can be cheaper if you’re paying by the hour. My father’s relatively simple estate cost us about $7,000 to settle, which seemed like a lot at the time, but it was actually fairly reasonable when I compared it with what friends in similar circumstances had spent.
What next?
Having a will is just the beginning. When it comes time for your loved ones to deal with your estate, they won’t be able to use your will effectively if they don’t know what was owned, where to find it, and how to access it. A will won’t necessarily provide these details—it may say, for example, that “half my estate goes to my son, the other half to my daughter.” Your heirs will need to figure out what the estate actually contains. You can help them by creating roadmaps similar to the ones I found in my dad’s desk drawer.
The lawyers I spoke with recommend using some kind of organizer that will gather your various documents and accounts, so that stuff can be found if you’re incapacitated or you pass away. There are several helpful products out there. Nolo publishes an ebook called Get It Together, which will help guide you through the process (there are several websites that do this, as well).
A decade ago, finding assets and accounts was fairly easy, says Brian Tees, a Texas attorney who is board certified in estate planning: “You’d tell clients to wait a month or two, and the statements will come in.” These days, many people have gone paperless—and you’ll need access to email, cloud storage accounts, and passwords to figure out what your loved one owned (and owed). The other side of the coin is that there may be things in your virtual life that you don’t want accessed after you pass away. Different services have different after-death programs and policies (Wikipedia has a good roundup of how each individual service handles the death of a user). “You need to think about what you want people to see and what you don’t,” says Hannibal. “Who do you want to see your emails and photos? Do you want a final social media posting?” The best practice is to designate, in writing, the power of attorney to manage your digital assets (here’s a helpful piece we published on that issue). The Torch provides this service and allows you to require that two people access the info together to better protect your digital last wishes.
Who’s in charge of my will?
You’ll need to name an executor for your estate (an executor is the person you’ve chosen as your legal representative; their job is to distribute your assets according to your wishes and the law). If you don’t have one, the state will appoint one, and that person may or may not be the one you’d hoped would act in your best interests. Executors should be aware of what you want and where things are. There’s a potential for conflict here: Some families name all siblings as executors; others name just a single child. My father wanted to avoid arguments, so he named me as executor and my brother as medical proxy. “I advise folks to look at all the tasks and assign them, so that everybody has a seat at the table,” says Tees. In my family, being executor meant putting in many hours of work over a period of years. My brother’s task was finished faster, but it was he who had to make the final decision to take my dad off life support, and I can’t imagine how hard that was.
Wait, it can take years to execute a will?
Yes. My father’s estate took nearly two years to dispose of, and it was relatively simple: We had a house to sell and just a couple of bank accounts to deal with. State probate courts work slowly, and that can wreak havoc on your emotions and your work life. “This is going to take time, and it will be hard,” says Hannibal. “The better prepared you are, the easier it will be.” In most states, executors are allowed to pay themselves a reasonable fee. It felt weird to take it, but after speaking with my brother, we both decided it was okay for me to be compensated for the unpaid time I needed to take off work.
Where should I keep my will?
Don’t lock things away. If you’ve locked a will and other documents in a safe deposit box and haven’t authorized others to open it, they’re going to need a court order, which takes time and money just to get things started. Better to use a fireproof safe (that your heirs can get into), and keep backup copies, says Hannibal. (Though it is important to remember that a copy of a will isn’t a will, and if that’s all you’ve got, you’ll likely need a court action for it to be seen as an acceptable document.)
What else should I know?
Don’t wantonly sell assets before a death as a way to avoid paying estate taxes. Different states have different capital gains laws—and there are times, Tees says, when he’s had clients dispose of property or stock while they’re still living, in an attempt to save money. Estate tax rates differ in different states, and federal estate taxes are almost always a part of seasonal tweaks to the tax codes. The bottom line is that your heirs will need to pay taxes on assets above whatever value is currently legally mandated; for federal taxes, that amount has varied wildly in the past 20 years, ranging from $675,000 in 2001 to more than $11 million today.
On the other hand, if you imagine that your parents might need long-term care, disposing of their assets at the right time can be helpful. “I’ve seen families with both parents in memory care for a decade or more. It sucked every penny out of their estates,” Tees says. Medicaid covers long-term care, but only once you qualify. For many, that means getting rid of those assets to allow this benefit to kick in—a process that usually has to be completed years earlier. Getting rid of those assets to allow public assistance to kick in earlier usually has to be done years in advance. “Those items can be put right back into your estate if you’ve gotten rid of them late in the game as a way to avoid taxes,” Tees says.
And finally, no matter what, Tees says, if you own a timeshare, get rid of it before you die. In his experience, there’s no asset that’s harder to dispose of. “Nobody wants them,” says Tees. “So my question, when a timeshare is part of an estate, is, ‘Why did you hate your children?’”