The #1 "Fire Drill" Action for Your Estate Plan
Estate planning can be a beast of a burden, or it can be as easy as anything you have ever done, depending on your situation. It is one of the most critical aspects of legacy planning and should be done, especially when you have spent so many years saving and being prudent with your investments.
The problem with estate planning is getting yourself through the doors of an estate planner to complete one. It could be one of your fastest returns on investment simply from protecting you from probate and the family protection it creates to maintain healthy relationships. Some of that value is financially, and some are emotional. I will tell you firsthand that the emotional aspect is far more critical than the financial frustrations that come with the probate process.
Probate is a legal process that takes place after someone dies. It includes:
- Proving to the court that a deceased person's will is valid (usually a routine matter)
- identifying and inventorying the deceased personal property
- having the property/properties appraised
- paying debts and taxes
- distributing the remaining property as the will (or state law, if there's no will) directs.
Typically, probate involves paperwork and court appearances by lawyers. The lawyers and court fees are paid from the estate property, which would otherwise go to the people who inherit the deceased person's property.
After reading some horror stories, you decide it's time to knock out your full estate plan and get things organized. The question is, what's involved? You will need the following items (there could be more depending on your situation) to complete your estate plan:
- Will/trust
- Durable power of attorney
- Beneficiary designations
- Letter of intent
- Healthcare power of attorney
- Guardianship designations
Once you have complete these items, you can rest assured that your legacy has a plan. But, is it? A plan is only as good as the plan of execution. This is where we introduce "the Fire Drill"...
You need action to your plans, and when something terrible happens to you or someone in your family, what do you do? What do they do? A fire drill is where you place yourself and your family in a situation where something terrible happens. Who takes care of what aspects, where are the documents that list your directives, your estate planning attorney, your financial advisor, and your CPA? Let's go a little further than that and talk about what's in your house. When people die, family attaches themselves to everything. The chair that person sat in, the pot they made spaghetti in for you when you were a child, the candy jar you used to steal candy from on the coffee table...and oh the coffee table! The fire drill takes the hard questions and digs a little deeper, and here is your action plan.
Once your estate plan is completed, invite over your family for brunch one weekend. Grab a box of those colored dot stickers for filing (https://bit.ly/3wPzwWE, for example) and a notepad from your office supply store. Get ready to have some laughs and maybe some cries because this is where the magic happens.
Fire Drill Time!
Before you eat, get everyone a beverage, maybe a mimosa, and sit them down. Start by explaining everyone's roles in your trust. You should also mention where it is located, maybe share a copy or two, and share the vital information regarding your wishes. Next, you want to take your notepad and label your children/heirs under each color from your sticker kit- kid#1 gets red, #2 gets blue, and #3 gets green, for example, and so on. Now, you will start walking around your house with your children and state who gets what and why followed by labeling the corresponding item with the color for that heir labeled in your notebook. Put the sticker behind the painting on the wall, under the lamp on the table, and so on. It will go something like this- little Debbie gets mom's rocking chair because she always loved rocking like a baby. Little John gets the sports memorabilia because he loves sports and would appreciate them most. These are examples, but the point is that the owner gets to tell the children out loud who gets what, and in the future, there will be little to no arguments! Here lies the beauty of the fire drill.
Lastly, once this sheet has been completed and items have been marked, make copies for all parties involved, so there are a clear understanding and record of "The Fire Drill". What this ultimately does is alleviates future emotional challenges people face when losing a loved one. When the wishes come directly from them before death, it allows a smoother transition. I've heard some nasty situations between siblings who used to be close to allowing things to fall apart and usually from lack of planning and communication.
In the past, I have been the 3rd party person in the room who moves this process along with the family. It can be enjoyable and entertaining instead of vicious and sad after the loss. Don't let the ugly happen to you. Call me, and let's chat if you have questions, and I am always happy to help.
This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation. Cadillac Wealth Advisors and LPL Financial do not provide legal advice or services.
