Executive Vice President, Portfolio and Wealth Management
With the onset of the COVID-19 pandemic, there seems to be a rush on clients seeking estate planning advice. There is certainly no replacement for personal advice from qualified counsel, but there are a few things you can do in the interim, including:
1. Ensure your financial accounts and other assets are properly titled. If you have a revocable living trust, this will likely be the appropriate title for your investment and banking accounts (other than retirement accounts). If you do not have a trust, pay attention to joint accounts versus individual accounts and the specific rules around joint tenants - tenants in common (JT-TIC) and joint tenants with right of survivorship (JTWROS). Assets titled JTWROS will fully pass to surviving co-owner(s), while your portion of any JT-TIC will pass to your estate. Transfer on death (TOD) and payable on death (POD), often referred to as Totten Trust, are commonly used to transfer financial assets to named beneficiary(ies) upon death, without sharing ownership during life. Of course, Limited Liability Company (LLC) and other corporate ownership structures will be most appropriate in some instances. Caution should be taken to avoid unintentionally mixing separate property with spousal assets.
2. Review and update your beneficiary designations on your retirement accounts, life insurance policies and annuities. Such assets pass by beneficiary designation, irrespective of any language in your will or trust, so it is important to carefully review the coordination between your beneficiary designations and other estate planning documents. While there are select circumstances where naming a trust as beneficiary of retirement accounts is appropriate, this should only be done with special handling by experienced tax and legal counsel to avoid adverse tax consequences.
3. Create a personal financial statement of your assets and liabilities, which your attorney will need for proper planning. A detailed list of assets including titling, cost basis, estimated market value and other ownership information (such as buy-sell agreements or life insurance contracts) will be critical for your attorney in determining the best way to achieve your goals while minimizing taxes. Likewise, knowing the terms of any liabilities (are they fully payable upon your death?) is also essential. Having this information prepared in advance will save you time and money. Ferguson Wellman and West Bearing are happy to help you gather and document this information, as well as provide wealth projections that account for anticipated future cash flows. Many attorneys find such projections informative during planning and helpful as clients decide on appropriate levels of gifting and other strategies.
4. Identify your successor trustee and/or executor. A key decision during the estate planning process is to determine which organization or individual you want to manage your financial affairs upon your incapacity or death. Many individuals will choose their spouse as their initial designee and then a family member or professional as the alternate successor trustee of their trust and/or executor of their will. In considering the best fit for you, consider their time, knowledge, objectivity, and state of residence (which may affect taxation of your assets). In evaluating professional providers, an organizations regulatory oversight, longevity, assets under administration, expertise of the team, fees, and willingness to work with other partners (such as Ferguson Wellman or your tax preparer) should be reviewed. You should also identify who will be named as your attorney-in-fact and your health care representative. These individuals will make financial and health care decisions on your behalf in the event of your incapacity.
5. Name your beneficiaries. Often one of the most challenging parts of an estate plan is finalizing who will benefit from your assets (children, grandchildren, philanthropic organizations, etc.) and if there will be any restrictions on when and how they receive the funds. Should the funds be distributed at the time of your death without restriction? Is it better to create a safety net that will provide for education, a stream of income or assistance in an emergency? These are extremely personal decisions and it is not uncommon for spouses to have differing perspectives. As a starting point, we encourage you to consider the approximate split in the dollars or percentages and be prepared for a hearty discussion with your attorney. If you are interested in ideas for reflecting your personal values (such as flexibility, hard work, education, community, or family) in your planning, look for our next communication on Values Based Estate Planning.
Important Disclosures: Ferguson Wellman and West Bearing do not provide tax or legal advice. This material has been prepared for general educational and informational purposes only and not as a substitute for qualified counsel. You should consult qualified professionals to understand how this information may, or may not, apply specifically to you.