How to Begin Estate Planning
Hello friends,
I want to share some information with you and I know this is not a fun topic. This topic isn’t easy to think about nor discuss because that means we have to consider the idea of dying, but the unfortunate fact is that many of us ARE NOT prepared to die and we will leave our loved ones with a HUGE mess to sort through while grieving. There, I said it. Now, please let’s think about it.
Over the past few years I have lost numerous loved ones and with that comes intense grief and the heavy burden of sorting through someone’s estate. It’s hard enough to lose someone you love, then to have to get rid of the things they held as important, and then have to sort through their life?? If you have ever had to handle an estate, no matter how big or small, nor how complex or simple, you know that it is a time consuming endeavor and not one that can be handled carelessly. Because of these experiences, plus a background in banking/finance, I want to share with you some information to help you get started BECAUSE YOU ARE NEVER TOO YOUNG TO PLAN.
We are not guaranteed nor promised another breath, and the more you prepare your estate will be a blessing to your loved ones who have to sort through it. So let’s dig in, and please bookmark this page, save it, pin it on Pinterest, and share it with your loved ones. If you take the time to read this, I assure you you will learn things you didn’t know and learn things that will help others.
*I am NOT an estate planner. I do NOT have all of the answers. Each state has it’s own estate process, guidelines, and protocols. I have come up with a somewhat universal list based on my banking knowledge as well as some things I have encountered with Texas probate. PLEASE do your research and seek legal advice if and as needed for your state’s requirements.
In no particular order:
BANKING and INVESTMENT ACCOUNTS:
If you have beneficiaries added to your accounts, the assets in the account will NOT go through probate and the assets will be directly given to the beneficiaries with a valid copy of your death certificate and this will avoid claims against your estate, long delays, potential taxes, and the legal costs imposed by the estate process.
All non-retirement accounts like checking, savings, and investment accounts can have beneficiaries listed on them. They are called TOD or POD which means Transferable on Death or Payable on Death. If you do not have beneficiaries listed on your accounts, you need to go to your financial institution and add them AS SOON AS POSSIBLE. Your financial institution will have forms for you to fill out to add them.
All retirement accounts can and should have beneficiaries on them! This includes all IRA types, 401-Ks, 403-B’s, annuities, etc. Check with your financial institution and make sure you have beneficiaries listed and that they’re up to date.
BENEFICIARIES:
There are two types of beneficiaries you can and should* add: PRIMARY AND CONTINGENT beneficiaries. Primary beneficiaries will inherit your accounts when you pass based on whatever percentage you assign to each person. Contingent beneficiaries will inherit whatever percentage you assign them if and only if the primary beneficiary (or beneficiaries) have passed already and your account wasn’t updated to reflect that.
MAKE SURE TO ASK IF YOU CAN ADD *PER STIRPES to the beneficiaries. Some places have this option, some do not even know what it means (I roll my eyes at this but just experienced this at a local credit union🙄). Per stirpes is a term that means that person’s inherited portion of your account will pass down to their heirs in equal shares without you having to name them. So, for example I have my brother listed as a beneficiary and marked “per stirpes” so if he has passed before I do (or at the same time) and I do not go back to update my beneficiaries before I die, his inherited portion of my account will go to his children in equal amounts.
EXAMPLES to help explain:
1) Your account has three primary beneficiaries on it: Billy, Bobby, and Betty and you have their percentages assigned as: Billy 20%, Bobby 40%, and Betty 40%. You also have two contingent beneficiaries listed: Timmy at 50% and Terry at 50%. If you pass away and Bobby has already passed away and the account beneficiaries were not updated, then Billy gets 20%, Betty gets 40%, and then Timmy and Terry split Bobby’s 40% by 50/50.
2) Your account has three primary beneficiaries on it: Billy, Bobby, and Betty and you have their percentages assigned as: Billy 20%, Bobby 40% with per stirpes, and Betty 40%. You also have two contingent beneficiaries listed: Timmy at 50% and Terry at 50%. If you pass away and Bobby has already passed away and the account beneficiaries were not updated, then Billy gets 20%, Betty gets 40%, and then Bobby’s heirs get his 40%. Timmy and Terry do not yet inherit anything.
3) Your account has three primary beneficiaries on it: Billy, Bobby, and Betty and you have their percentages assigned as: Billy 20%, Bobby 40% with per stirpes, and Betty 40%. You also have two contingent beneficiaries listed: Timmy at 50% and Terry at 50%. If you pass away and this time Billy AND Bobby have already passed away and the account beneficiaries were not updated, then Betty gets 40%, Bobby’s heirs get his 40%, and Timmy and Terry inherit Billy’s 20% 50/50.
*I know these are a little confusing perhaps, but I’m hoping to educate you on how to thoroughly add beneficiaries.
*The most common beneficiary setting is likely to be: Primary beneficiary: your spouse; Contingent beneficiaries: your children (and mark them per stirpes even if they’re young kids now, they may have children one day). The second most common beneficiary setting is likely to be: Primary beneficiaries: your children; Contingent beneficiaries: your grandchildren BUT this is again when it would be wise to use per stirpes on your primary beneficiaries being your children because WHAT IF you end up with more grandchildren and forget to update your beneficiaries? See!?!?! It’s a lot to think about.
You will need names and dates of birth to add beneficiaries. They may want social security numbers but most do not require them.
You can add the names of trusts as beneficiaries.
CREATE A WILL:
A will is a powerful tool to help your loved ones know your wishes if and when you pass. It is NEVER too early to have a will and you can amend it through the years as you see fit. A will does NOT override beneficiaries listed on accounts (see above) because that is a contract between you and the financial institution. A will can and does provide beneficiary instructions for any assets that do not have beneficiaries listed on them, whether real assets or financial assets. Everyone should have a will, even if you think you do not need it. If your estate is simple and all accounts have beneficiaries, GREAT! Your executor will not need to put your will through probate. But, it always best to have one.
You can create a will using online sites for free.
Check with your state to determine what is needed for your state’s verbiage and for it to be considered legal. Some states allow holographic wills (hand written) but may or may not require witnesses to have signed it. Some states require the will to be signed in front of a notary with independent witnesses (meaning, they will in no way benefit from your will).
List in detail what you want done with your house, your car(s), your accounts that may not even be created yet that do no have beneficiaries on them, your pets, and your belongings. The executor may have to sell assets to pay off any debts owed by your estate.
Name an executor that you trust and make sure to ask them first. You should also list a back up executor should the chosen one be unable or unwilling to serve.
Important verbiage to state in the will is that the executor “can serve independently without bond.” If you do not state this phrase, the court may require dual executorship which would be a nightmare to get two signatures for everything and the court may require the executor to be bonded (as in pay to promise they will follow the will’s designated wishes honestly).
PROPERTY DEEDS and CAR TITLES
God bless Texas, y’all. Texas is one of a handful of states that offers this probate loophole…and YOU NEED TO KNOW ABOUT IT. **Check with your state to see if your state offers this too.
Home titles/deeds can be listed as JTWROS - joint with rights of survivorship. This would prevent any issues should your spouse or whomever you purchased a home with pass away. If it is JTWROS their portion of the house automatically rolls to you, even if they have a will. If you do not have JTWROS on your title/deed and they pass away and they do not have a will, their portion of the house is subject to the estate probate process and may have to be sold to pay off any debts of/claims against the estate.
If you own your home and therefore have no mortgage on it and own/have the property deed outright, you can file a TODD - Transfer on Death Deed. This will prevent your house or property from going through the probate process! The beneficiary listed will need your certified death certificate and to complete the affidavit of death included in the kit and the home title/deed will be transferred to the beneficiary. And guess what?? The form also provides for a contingent beneficiary. You submit the paperwork to the local county clerk for filing. You can copy and paste this or click the link: https://www.texasatj.org/sites/default/files/TODDKit.pdf
If you own your car and therefore have no car loan/lien on the car and have the title to your car, you can add a beneficiary to your car title using: Beneficiary Designation for Motor Vehicle Form VTR-121. You can copy and past or click here: https://www.txdmv.gov/sites/default/files/form_files/VTR-121.pdf
If you’re purchasing a car soon - you CAN list the title of the car as JTWROS - joint with rights of survivorship. You can also amend the title to add someone as JTWROS if you already own the car. This would be beneficial if the car is in two names and one person passes, all the other person would need is the certified copy of the death certificate to get the title changed to just his or her name. NO ONE had ever told me this in my entire life.
POWER OF ATTORNEY:
There are technically five types of power of attorney, but there are two important ones that should be considered and filled out. *Check with your state’s requirements as some states have specific forms for that state and may call it something a little different such as Tennessee now calls a medical power of attorney a “health care agent”.
Medical power of attorney - this form will list out specific things that the power of attorney can make decisions on on your behalf if you are unable to in good judgement or are incapacitated. It will list your requests for advanced life sustaining care such as but not limited to: use of a ventilator, a feeding tube, or dialysis. You will initial next to the things you agree to for your elected person to be able to make those decisions.
Financial power of attorney (also called a general durable power of attorney) - this form will list out specific things that the power of attorney can do on your behalf with your financial assets such as but not limited to: full authority to utilize your account, to sell or buy stocks/investments, to open or close accounts, etc. The form will list off things that you will have to initial next to for the elected person to be allowed to do.
There are free legal forms available online and some sites offer forms specific to certain states.
You will need to ask the person if they’re willing to be your power of attorney and both sign in front of a notary.
You can revoke and update these at any time should you want to change your power of attorney.
Some companies have their own power of attorney forms that you can use specific to just that company if you do not have a general form. For example: Fidelity Investments has a durable power of attorney form you can use for your accounts with them. The form will not be able to used outside of Fidelity though. So, if you have assets at various places and want your power of attorney to be able to handle everything, it is best to have an independent form drafted.
Some companies also offer alternatives to power of attorney such as “full trading authority”, “limited trading authority”, and “inquiry access”. You can click here to see how Fidelity Investments distinguishes each one from the other. Ask your financial institution what they allow or offer to see what might make sense for you.
EXPLANATIONS:
1) The benefit to financial power of attorney is that in the event something happens to you, someone can fully access your account(s) to handle your needs without restrictions. In essence, they can act as if they are on the account.
2) The benefit to full trading authority is that someone can access your account to place trades and withdraw funds to the address on file or the bill-pay companies on file. They cannot change the address on file.
3) The benefit to limited trading authority is that someone can place trades for you and inquire on the account, but nothing more.
4) The benefit to inquiry access is that the person can ask for a balance or recent transaction history, but they cannot act on the account at all.
Once you pass away, all power of attorney forms of any kind become voided.
BUSINESSES:
I cannot even begin to explain how this works, so if you own your own company please read the bi-laws you signed to see what you put into effect should you pass away. Some company bi-laws state that the company would dissolve immediately if one member of the company passed. Some company bi-laws may include a clause that your percentage of the business will be passed to an inheritor and they may or may not have operating rights. You can update/amend if needed, but please review your documents. Please consult with an estate attorney on what would be needed to put a business through probate. We were told that a separate probate process would be needed for my dad’s business, but we haven’t gotten that far yet. So protect yourself!
ACCOUNTS AND PASSWORDS:
It would be wise to create an Excel or Word document with all of your log ins and passwords, and then save it as password protected. You can send this to your “safe” person or let them know where to find it on your computer. You can also write it down and put it in a secure spot and let the “safe” person know where to find it. This is also critical to do with your important documents: Let them know where your will is located, your titles and deeds, etc.
I know this feels risky, but let me break it down to you…
-If you pass away in some unmentionable way and your phone goes with you, how will anyone be able to get into your computer, your emails, and your accounts to figure out what to do or which accounts to start closing?
-If you pass away and someone has your phone but cannot unlock it, the same questions above apply…
-If you pass away and someone has your phone and knows the password to your phone, that person can at least begin to whittle down your accounts one by one by finding them and using the password reset options that are being sent to the email account you have logged into that phone. This takes a lot of time and effort, but the person can slowly begin shutting things down while waiting for your death certificate and the probate courts to provide a letter of testamentary (you’re looking at 3-6 months). In that time, your phone bill, cable bill, electric bill, and other bills are due/past due/late OR the person can be paying those bills and closing down the accounts.
-If you pass away and someone has your phone and your log in information for accounts, they can get a leaping head start to close things that they can, start of list of to-do’s, and some companies will put a freeze on the account with a death notice until the person can send a certified copy of the death certificate, but at least you’re not being billed for unused services! All debts will be filed by creditors against your estate.
FUNERAL WISHES:
It’s morbid, but it’s necessary. Someone should know your funeral wishes. Do you want to be buried or cremated? Do you want a traditional service or a celebration of life? Open casket or closed? Is there a special song you’d want played that’s reflective of who you are? It’s AWFUL to think about, but can be important.
SOCIAL MEDIA:
I do not know about all of the social media platforms out there, but I do know that Facebook has an option to designate a “legacy” person. This person is then allowed to handle your account after you pass away. You can select for your account to be deleted once Facebook is notified of your passing or for the legacy person to maintain your “Memorialized” account as he/she deems fit. Without this legacy person added, Facebook will not close/delete your account until they get a death certificate and letter of testamentary from the probate court establishing the executor (from what I have been told). You can copy and paste or click this link to read more about it: https://www.facebook.com/help/103897939701143
TO FIND THE LEGACY DESIGNATION OPTION ON FACEBOOK:
-go to settings
-under the Meta section, select personal details
-select ownership and control
-select memorialization or delete account after death
-if you select memorialization, then you can add a legacy contact
*Facebook specifically says that Instagram accounts are handled differently after death so I went through the steps on Instagram and it lead me back to the same Facebook Meta stuff listing only Facebook as being able to be memorialized or deleted after death. So, I still don’t know how Instagram would be handled - but I would guess it would be deleted once notified of death with a death certificate…?
I know this was a long and heavy post to read, but I hope it brought some awareness to you on the the things that can linger should we pass away today or tomorrow, next week or next month. There’s no way to know when our time will come, so the best thing you can do is prepare the best that you can for the unknown.
I want to reiterate that I do not know everything there is to know about estate planning and suggest speaking with an estate planner/attorney and your financial advisor to dig deeper. Please share and comment below if you have any advice to give as well. We’re all in this together. ❤️
XOXO
PS: If you haven’t yet asked Jesus Christ to be your Lord and Savior, welcomed Him into your heart, and to forgive you for your sins, then that is STEP ONE in preparing for departure. Heaven is real and I highly suggest the book Imagine Heaven if you have any doubts about God and Heaven. I also highly suggest the book More than a Carpenter if you have any doubts about Jesus and the Bible being real.
Some of the links in this post are affiliate links and if you use them to make a purchase I will earn a small commission at no cost to you.
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