Two Simple Ways to Avoid Estate Planning Problems

A few years ago, I wrote about the helpful steps my father-in-law took. Among them were conversations about my in-laws’ accounts and their life insurance policy. Having this information allowed me to step in immediately to help my mother-in-law following his passing.

Discussions in the investment world generally focus on building and preserving wealth. How you invest and what you invest in are important topics. They need to be thought through and carried out in a manner in accordance with your goals, tolerance for risk and preferences. The Individual Investor Wealth-Building Process (formerly code-named “The AAII Way”) has focused so far on helping you define them.

Successful investing isn’t just limited to what goes into your portfolio and how it is managed. Adjusting for changes in your life and maintaining updated estate planning documents is also important. Failing to do either can lead to unintended problems. Some of the problems might be nuisances in terms of relative scale. Others could lead to court fights and/or unwanted transfers of wealth.

Fortunately, avoiding such problems is relatively easy—and since it’s currently financial planning month and national estate planning awareness week starts on Monday, now is a good to take action. What you need is a little bit of organization and a commitment to a regular review process. For the latter, I find it helpful to set up calendar reminders. Simply setting up a recurring reminder in your smartphone or on your computer works really well.

As far as organization is concerned, two new wealth-building worksheets will assist. The first is an inventory of key estate planning information. The second is a life stage changes checklist. Both are simple but highly effective tools.

The inventory of key estate documents asks you to list information you might consider to be personal. Examples include the fiduciaries on your accounts, the financial professionals you work with and where your will and trust documents are stored. We’ve also included fields for items not directly related to the realm of investing, such as contact information for your doctors and the funeral home or cemetery you have set up arrangements with. There’s even a spot for where your military identification can be found, which is important if you have served and need care at a Veterans Administration facility or opt to be buried at a military cemetery.

Having all of this information in a single document is invaluable to your spouse and your heirs. It enables them to step in on your behalf should you no longer be able to manage your assets and when you die. While we could have limited it to just financial accounts, it is more helpful for heirs to have a single master document with all of this information. (I’ve been maintaining a version of it with my wife for several years.)

We purposely chose to keep this document separate from the investment account inventory list. Our rationale was a perception that many of you would prefer to keep such information private for reasons of security. The worksheet is downloadable and can be printed.

The life stage worksheet prompts you to think about what might have changed in your life. It should be gone through annually or whenever a big change has occurred. The most obvious example is one involving a change in your family—be it a birth, adoption, divorce or death. Other life stage events listed on the worksheet include a change in your or your spouse’s employment status, housing arrangement, health or wealth. Any of these events have the potential to warrant a review of your goals and tolerance for risk.

A large influx of money—say from an inheritance or the sale of a business—could enable you to take on more risk and potentially make secondary goals more of a possibility. A deterioration in your or your spouse’s health may instead warrant a more conservative allocation. This would particularly be the case if more costly care and/or living arrangements (e.g., memory care) are required.

We encourage you to try both worksheets and let us know if they are helpful.