Roughly two-thirds of Americans do not have an estate plan, according to a recent survey from Caring.com.
If you are among the minority of US adults who have prepared a will, living trust, and other end-of-life documents, you may think that your estate plan is settled. But you might want to think again. An estate plan is a living set of documents that should be regularly reviewed and updated. Even if you are vigilant about changing your estate plan over time, there may be aspects that you have missed, such as beneficiary designations for retirement accounts or life insurance policies.
Do you have backup decision makers?
A well-thought-out estate plan involves numerous individuals that you designate to carry out your stated preferences. They include:
Choosing these crucial decision makers is not a matter to be taken lightly. They will be exercising considerable control over you and your affairs and must be trusted to act in your stead. However, there may come a time when they are no longer able (or willing) to do what you are asking them to do. This is why it is important that you list your first choice, as well as at least two backups for each of these positions in your estate planning documents.
The key takeaway is that you should regularly reevaluate your choice of trusted decision makers and name backups in case you are no longer around to amend your will, trust, or other estate planning documents. Alternatives will ensure that there is no catastrophic failure in the chain of command that leaves crucial end-of-life matters in the hands of the courts.
What about your pets?
Many pet owners will acknowledge that their furry (and feathered and scaled) friends are very much a part of the family. Your pets are arguably more reliant on you than your children for their daily needs. Have you stopped to ask who will look after your beloved animal friends when you are not able to do so?
In addition to naming a legal guardian for your children, you can name one for your pets. As with any other trusted decision maker, it is helpful if you can provide a list of other people to care for your pet in case your first choice is unavailable, instructions for how your loved ones can find a suitable home, or shelters that you are comfortable having your pet surrendered to in the event no one can care for your pet. Beyond naming a caretaker for the animals that survive you, it is best to put your wishes for their care in writing.
Have you named contingent beneficiaries?
A beneficiary is someone you name in your estate plan to inherit your money and property, such as bank accounts, investments, and insurance policies. Upon your passing and the administration of your estate, these accounts and property are distributed to or managed on behalf of your chosen beneficiaries. However, there are a few instances where you will need a contingent or backup beneficiary:
Without a contingent beneficiary, your money and property might be passed on according to state law in any of these scenarios. This could require going through the probate process, which can delay distribution, increase estate settling costs, and lead to family infighting. All of these potential outcomes are best avoided, and that can be easily done by naming a contingent beneficiary—or two, or three, or more, if you have any doubts.
Have you considered the unthinkable?
Although you may prefer not to think about it, you should be prepared for the unthinkable: all of the loved ones you name as beneficiaries in your estate plan predecease you.
In this highly unlikely but catastrophic scenario—in which nobody in the legal chain of inheritance is alive to receive the proceeds of your estate—having contingent beneficiaries may not be enough. Depending on where you live, if you have no surviving family, the government could end up with your money and property.
Although this is not a common occurrence, for those with smaller families and few living relatives, it is not impossible. Adding a remote contingent beneficiary clause or family disaster plan to your estate plan allows you to name a charity or other organization that will receive your money and property should the unthinkable happen.
Planning for the Unexpected
For many Americans, illness, accidents, or other unexpected life events serve as a wake-up call that they should have a basic will, at the very least. Although incredibly important, many people still put off estate planning, citing procrastination, a perceived lack of enough money and property, lack of knowledge about the process, and concerns about costs.
Estate planning does not have to be complicated or expensive, and when you consider the potential costs of not having an estate plan, can you really afford to leave things to chance—or the government? For those who already have documentation in place, your plans need backup plans to account for the unexpected. It is worth your peace of mind to revisit an estate plan and add backup decision makers, pet caretakers, contingent beneficiaries, disaster clauses, and anything else you may have overlooked.
Our estate planning attorneys can ensure that all of your bases are covered. To schedule an appointment, please contact our office.