[Editor’s Note: Today’s WCI Network post about estate planning comes from Passive Income, MD, and is a topic we frequently discuss on this blog. Many doctors, including me, have at least a few holes in their estate plan needing attention. This is a great reminder of ways to get your estate plan in order “just in case”. The hardest issues for me with estate planning are the decisions you must make–how much do you really want to leave your kids and how, for instance. Drafting up the documents is much easier than deciding what to do IMHO. Enjoy the post! ]
Thinking about your own mortality is no fun. Personally, it’s not something I often consider. I’m usually too busy trying to figure out how to live the most extraordinary life possible.
However, estate planning has been on my mind. Honestly, I’ve been thinking about it a lot more these past few weeks.
Of course, even before everything that has happened with the coronavirus, one of my big goals for this year was to get all of my estate planning in order. Still, it’s safe to say that recent world events have maybe bumped the priority up a couple of notches.
Now, don’t get me wrong – I expect to live a long life. I’ve taken certain steps to improve my own health. I exercise and have begun to eat better so that I’m around for my family as long as possible. I can’t control everything, but the things I can control, I’m making the best of.
My efforts at living a longer, healthier life, however, have brought to light the inevitability of death. I’m in my 40s now, and sadly, I’m starting to see friends from school starting to deal with major health issues or involved in serious accidents. I don’t know if that feels like it’s happening more and more to you, but I’ve certainly noticed it.
The old adage holds true, though: death is simply a part of life. Having fear or anxiety about death may not be healthy, but I’ve certainly seen what happens when families aren’t prepared for that moment.
So, I vowed not to let those same things happen to my family.
My goal is to get everything in order just in case something happens to me. That way, I can rest assured that even if the worst happens, I know my family will be taken care of. If you share that goal, you might be interested in some of the major considerations I’ve been tackling.
A living trust is simply a set of instructions for what happens to your assets after you pass.
I always thought that a living trust and will were synonymous but, as it turns out, they’re pretty different.
A trust allows you to assign a trustee, or someone who will handle your assets on behalf of your beneficiaries. You do still give instructions for how those assets are distributed, though, much like a will.
However, a trust has three main advantages:
First, it allows you to avoid probate court. With a will, the court still needs to go through the process of transferring your assets to your beneficiaries. However, with a trust, even though you’ve passed, your trustee can facilitate the distribution of assets. Probate court can take a while and is notoriously expensive (sometimes up to 2-3% of your assets are paid in fees!).
Second, with a living trust, your assets can be transferred privately after your death. Contrast this to a will, which is a public document, and all transactions are public as well.
Third, a trust can take effect in situations other than death. For example, if you’re mentally incapacitated, your trustee can be the one to take over, rather than someone the court appoints.
A will, however, is useful for assigning guardianship of your children in case something happens to you. Without a will, guardianship would have to be court-appointed.
Ultimately, of course, choosing to go with a trust or a will (or both) should be decided with the help of an estate lawyer.
I had a revocable living trust created a few years back but, in reviewing things, I realized that I hadn’t moved all of my assets into the trust. I’ve since bought some rental properties and made some investments.
So I’m currently working on cleaning things up and making sure everything is housed properly under the trust.
Advance Directives & Medical Power of Attorney
As physicians, we know this area all too well. I’m sure all of us have had to address this issue with a patient at some point in our journey, whether it was back in medical school or residency.
It turns out that completing one for myself was pretty easy; I simply filled out a form that expressed my wishes. Did it once and, since nothing’s changed in terms of my marriage, it’s all still the same.
Organization of Documents
Do you know the location of all of your important documents? Things like deeds, certificates, forms, titles… If you’re like me, I knew where maybe one or two of those were in my home.
I realized that this wasn’t ideal, so, lately, I’ve been working on organizing my important documents and making sure they’re stored in a secure location. I don’t know about you, but I often have a hard time finding everything when I need them, so this has been very beneficial.
One thing that has really helped me organize things is the In Case of Emergency (ICE) Binder. It’s a simple set of documents that makes sure my loved ones know have all the information they need if something happens to me. Super easy to fill out and has a checklist of things so I know I’m not forgetting anything.
But then I decided to take it a step further and began looking for an online vault that allows me to store all this information. If you have a financial advisor, they will often have that sort of thing available to you.
For some extra peace of mind, it’s certainly worth asking for.
In the event of your passing, have you considered how your family is supposed to get access to all of your files and documents? After all, most of us don’t share our passwords with anyone (and rightly so).
This could make it difficult for your family to have access to important documents, cloud storage, and accounts.
I like to use a password keeper like LastPass and One Password. Software like these help you to create secure, unique passwords. All of your passwords are locked behind one master password. If you share this single password with a trusted family member (or a trustee), they’ll be able to gain access to all of your stored usernames and passwords.
Of course, there’s always the fear that someone can crack that one password and have access to everything. On the other hand, if you’re like me, the only other option is to make all your passwords so similar (read: easy to remember) that they provide little-to-no security anyway.
Organization of Investments
I like to invest in multiple different types of investments. I have stock accounts, retirement accounts, 529s, crowdfunded investments, syndications, funds, and angel investments. It can be a lot to track. So how do I keep all these documents in order?
Well, that can be a job in and of itself.
Those go in the ICE Binder, as well, but I also have a simple Excel spreadsheet that outlines what the different investments are, and I update this list every time I make an investment. It’s kind of like a treasure map in case something happens to me.
One of the best ways to ensure your family’s well-being in the event of your death is, of course, life insurance.
I bought my first policy ($2 million, 20-year term) when my wife and I bought our first home, and then I purchased more term life insurance ($2 million, 20-year term) the moment I had my first child.
I simply called my agent to review the terms of my policies and to make sure I was adequately covered. He said I was.
Of course, there are other things to consider besides death. If I were in an accident and permanently or temporarily disabled, for example, my family could still be in a bad situation. I made sure to plan for that contingency.
Fortunately, even if something happened and I could no longer put an epidural in, I could still (hopefully) run some of my businesses, which would provide most, if not all, of the income we would need.
Still, I consider it a very good idea to have specialty-specific disability insurance. It could make all the difference in this event. Make sure to contact an independent agent who can shop multiple policies on your behalf.
Thoughts on Estate Planning
Making a plan for what happens after you die is, admittedly, an unpleasant undertaking. However, it’s also extremely important – not just for your family’s well-being in a worst-case scenario, but also for your peace of mind.
Since I began taking these steps, I can say that, if I were to pass on, my family would be taken care of financially because I made estate planning a priority, and I hope to have made their difficult time just a little bit easier.
It’s funny, making sure that all my bases are covered helps relieve the worry of dying so I can actually enjoy life a lot more.
Anything else I’m missing that I should be thinking about when it comes to estate planning? Have you made estate planning a priority?
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