Estate Planning Basics: What Everyone Should Know

I like to write at least one article on basic estate planning each year because it’s just that important.  Financial advisors spend years working on financial plans and investment programs that can easily be dislodged by overlooking small estate planning tasks.  Many people start thinking about these issues once they get married and/or have kids because that’s when others start relying on them.  Even if that continues to be the case, some basic level of estate planning really should be a priority for everyone, even if to a lesser extent.  For example, an unmarried individual with some money and property may use a Will simply to designate a few people and charities to give their stuff to.   However, a married couple with a baby may be more concerned with issues of guardianship such as what they would do in the unspeakable scenario in which they were to die together and somebody had to take custody of the kids.  This should be spelled out in your Will so that relatives and friends don’t have to guess at your wishes about such a sensitive and important topic.    

In a Will, you can designate who should get all your money and property and things.  However, certain financial accounts don’t get passed along according to instructions in a Will.  Qualified accounts such as IRAs and 401Ks have specific beneficiary designations, as do life insurance policies and most annuity contracts.  These beneficiary designations will override the instructions of a Will, so be sure to check and double-check who your beneficiaries are and reevaluate those decisions after any major life event or just periodically every few years.  I’ve seen many odd and unfortunate scenarios come about because beneficiary instructions weren’t updated at the appropriate times.

Along these lines, I think having a document of some sort which lists your assets in a simplified way is important.  Wills don’t usually itemize where bank accounts are held along with other investments.  Sometimes Wills very simply list percentages and don’t elaborate at all about where the money and other things are located.  Having a list that says “I have 2 bank accounts, one at bank X and one at bank Y, I also have a valuable painting in my attic and an old 401K held with company X” can go a long way to clearing up confusion and uncertainty.  This can take a lot of the research and guess-and-check work out of the process of finding all the assets.  I’ve seen several scenarios where money pops up years later because a person dies without realizing that their family might not necessarily know they had a second life insurance policy, hidden cash, rare baseball cards, and so on.

Together with your list of assets, you should also keep any relevant phone numbers, e-mail addresses and other contact information for people who can simplify the process further.  The clearer and more detail you provide for the people trying to decipher your estate, the easier it will be.  For example, if you have 2 life insurance contracts, make clear the name of the company, the phone number, and any agent or rep that helped you service the contract if one exists.

The next important document to have is a Durable Power of Attorney (POA).  This is essentially authorizing another person (your agent) to make decisions for you, particularly relating to your financial accounts, should you become incapacitated.  In fact, you often don’t even need to be incapacitated for this person to utilize the Power of Attorney, but that is most often what they are intended for.  Commonly, your POA will write checks for you, handle bank accounts, real estate issues, etc, in the event you become unable and need your affairs better looked after.

The next two related items are the Health Care Proxy and Living Will.  These allow an individual to elaborate about their specific wishes with regard to the end of their life.  The health care proxy is actually an authorization for someone else to make decisions in the event the individual becomes incapacitated.  These docs are important and deal with issues usually regarding the final days of one’s life and whether to keep them on feeding tubes and other artificial means which many people don’t want.  Sometimes these tie in with religious issues and moral and ethical beliefs, which is why they are better to spell out in advance when possible.

Finally, trusts.  Trusts aren’t only for wealth people.  If you have kids under age 18, you should direct your Will to create a trust and name trustees who can help distribute funds until the kids are appropriately able to handle the responsibility that comes with having money.  There are many different types of trusts which can apply in different circumstances.  Having a good estate planning attorney should help to make sure you aren’t overpaying Uncle Sam when/if someone in your family passes away with more money than the standard estate tax exemption allows for.

The above gives you a pretty good idea of estate planning issues that apply to most people.  You can prepare some of these documents on your own at websites like Legal Zoom.  Or, you can contact your financial planner who should have contacts you can use for these tasks.

As always feel free to contact me with any questions or concerns.

Russell Bailyn

Wealth Manager

Premier Wealth Advisors, LLC

14 E 60th Street, #402

New York, NY 10022

P: 212-752-4343
F: 212-752-7673


The opinions voiced in this material are for general information only and is not intended as a substitute for professional legal advice.  Please see your legal professional regarding your own specific situation.

About First Allied Securities, Inc.
First Allied Securities, Inc., serves as the firm of choice for independent financial advisors who seek to grow their businesses. First Allied’s exclusive business development platform has been constructed to provide entrepreneurial advisors with the industry’s most comprehensive platform for growth. First Allied is a member of Cetera Financial Group, RCS Capital Corporation’s (NYSE: RCAP) retail investment advice platform. As of December 31, 2013, First Allied had approximately $27 billion in assets under administration and 795 affiliated financial advisors. First Allied Securities is part of First Allied Holdings, which also includes The Legend Group, a specialized provider of investment and retirement solutions to the not-for-profit space, including 403(b) accounts.

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