By Rick Waechter, Founder

Estate planning can seem pretty legalistic – a pile of hard-to-understand documents, drafted by an attorney, which you sign and then throw into an actual or digital file cabinet, then to get on with your life … hopefully not think about them for years.

If that’s your approach, you have wasted your money, and you risk regret when you die or become incapacitated.

However dry, estate planning is important. But to make it effective, you must take practical steps to implement it. These steps are not hard. They often don’t require much time. But taking these steps is like the difference between buying a cool new, expensive toy and actually learning how to use the toy.

Here they are:

1. If you create a living or revocable trust, fund it. Move your brokerage and bank accounts into the trust. In some states, your trust should own your house, too. Gift your personal property to it – including, if possible, your car. A key benefit of a living trust is avoiding probate when you die. If the trust does not own the assets in your name, you don’t avoid probate.
2. Make sure there are no “straggler” assets. Often, people create trusts, diligently fund them by moving their brokerage and bank accounts into the trust, and then later make private investments in their own name, not the trust. The bad news: those private investments will go through probate when you die. The worse news: it’s usually a small investment which can cost your heirs more in time and legal expenses than the value of the investment itself.
3. Keep your documents where you can easily access them. Sorry for a statement of the obvious, but too often, people can’t find their documents. Keep original signed copies in a fire-proof safe, and keep a digital copy in the cloud, and with your financial advisor.
4. Review your documents annually. This should not take more than 15 minutes. Just review the key provisions. If you don’t have a handy summary, get one from your attorney or financial planner. The purpose: make sure nothing is painfully out of date due to a divorce, new child, death, or change of thinking about whom you can trust.
5. Make sure all relevant parties have an up-to-date copy of your documents. The executor(s) should have your last will. The successor trustee(s) should have your trust. The agents on your powers of attorney should have the POA(s).
6. Make sure your beneficiaries know they will inherit something when you die. If you’re uncomfortable telling your kids (or others) how much they will inherit, at least tell them they will inherit something, and the source (a trust, a will, a retirement plan, etc.) At some stage, they should know roughly how much to expect. Especially if it’s a large amount, it is almost always better to give them time to think through having it, compared to receiving a large inheritance with no notice.
7. Create a list of every account and asset/liability and make sure your executor can find the list. That will allow them to know how to settle your estate – because they’ll know what’s in your estate. Scavenger hunts are incredibly frustrating for your trusted party … and an unnecessary expense for lawyers.
8. Create a list of passwords and make sure someone knows where it is. Best practice, by far, is using a password manager. Your trusted person just needs to know where to find the password to the password manager. Some password managers allow you to name a legacy contact.
9. Provide your primary care physician and your hospital with your health care power of attorney and advance health care directive. Most medical professionals have a portal (doesn’t everyone?) where you can upload the health care POA and advance directive. The POA appoints someone to make health care decisions if you cannot. The health care directive sets out your preferences for care near end-of-life.
10. Register your financial power of attorney (POA) with your local court. No, this is not required. But it makes it easier to use the document. For example, some financial institutions will want the document registered with a court, which will stamp the document attesting the registration. As a reminder, a financial POA allows a trusted person (your agent) to make financial decisions for you. This is critical if you become incapacitated.
11. Make your financial POA durable. That means it will stay in effect if you are incapacitated. You don’t have to make it durable, but I struggle to understand why you wouldn’t.

Whew … that wasn’t so bad, was it?