Financial Planning for September 2014

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Is Your Estate Settlement Ready?

If you were to pass away today, would your surviving spouse, children and/or team of professional advisors know all of the relevant details necessary to settle your estate? For example, do they know where your will is located? Do they know who you have selected as the estate executor and successor trustees of any trusts you manage?

Recognize, too, that you might want more than one person to have access to this information, in case a coincidental – but not necessarily out of the ordinary – situation were to occur. For example, you and your spouse could be involved in the same auto accident and die at the same time. Or your advisor might become incapacitated during the same timeframe as your death. If only one of these people knows the details of your estate, the rest of your heirs and loved ones would be at a loss as to where to begin.

To further complicate matters, you might have assets scattered among different management companies. Even a trusted family financial advisor may not be aware of assets held by other brokerage accounts. For example, if your financial advisor is not involved in the management of 401(k) plans, IRAs, pensions, money market funds, certificates of deposits or checking and savings accounts, some of your assets might not be discovered until long after you pass away.

And since an advisor’s role frequently extends only as far as the assets under his management, he may not know about your current required minimum distributions for an IRA or 401(k) plan, or whether your pension benefits will continue for your spouse. There’s not much he can do if you began drawing Social Security benefits early and the spousal benefit drops to half upon your death. These are the types of issues you should investigate and consider as you pull your estate plan together.

If you think you’ve got the bases covered by working with an advisor, consider whether your spouse will feel comfortable trusting that advisor once you are gone. By the same token, adult children may step in to help manage your spouse’s finances. If your child has never met your financial advisor, he might recommend that your spouse transfer accounts to his advisor. In this situation, the one person you have worked with to coordinate your finances after your death may no longer be able to do so.

It’s important to understand that spouses, children and good friends are not always completely rational in the aftermath of a death – particularly in the case of a sudden death. The shock can put them in a tailspin, so even simple financial decisions become overwhelming. They also may not be able to remember what you’ve told them about the location of the will, financial accounts and advisors, so it’s a good idea to write your instructions down. At least with a set of written instructions, your loved ones will have to remember only the location of this one document for the key to discovering all of your other plans.

Even if you have a team of professional advisors, consider assigning one of them as the sole point of contact to coordinate all aspects of your estate upon your death. This can make things a lot easier for your loved ones so they do not have to contact all of your advisors and manage each facet of your estate plan. Create a written document with all relevant instructions – such as where your will is located and who you have selected as estate executor – and make sure that more than one person has a copy of this document. Take your spouse and/or children with you when you meet with your advisors so they can develop a level of trust in them and will know who to deal with when you pass away.

You may think you have your estate in order, but one of the most important keys is to communicate your plans to heirs and loved ones. After all, grief over the death of a loved one is hard enough – what you can do now is help ensure that settling your estate goes as smoothly as possible.


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