School’s in Session: Teaching Your Children About Your Estate Plan
It’s back to school season! With that comes football, cooler weather, and back-to-school shopping. Whether you have children or not, it’s difficult to miss the horde of parents and children rifling through shelves of school supplies and racks of clothes. Those who wait until the last second run the risk of being unprepared for the first day of school. Getting ahead of the curve helps to mitigate that risk. The same can be said for introducing your children to your finances. Without some guidance from you, your heirs may be left with a limited understanding of your estate during an emotional time. To make it easier on your heirs, we suggest bringing them into the fold while you can guide and advise them. One way to facilitate this is to compile a file holding some important documents and the location of others. The final file should be beneficial to your heirs, but the process may be beneficial to you. You can treat it as something of a comprehensive review of your finances. We will start with the how and then go into the what of putting together this file.
How the information is organized, physical or digital, is up to you. It would be wise to keep this file somewhere secure, such as in a safe or an encrypted file. Whether you choose a three-ring binder or a USB drive, consider security against unwanted intrusion as well as accessibility for whom the file is meant. What specifically to include will depend on what you own and what you owe. With that in mind, please treat the following as a jumping-off point and not as an exhaustive list.
A smart place to start is with a copy of your Last Will and Testament, Power of Attorney, Medical Power of Attorney, Physicians Directive, and trust documents. This is a chance to make sure your estate documents are up-to-date. You should also include insurance information, especially life but also homeowners’, car, and disability. Sometimes you can collect prepaid premiums if the plan is cancelled. If you are collecting Social Security benefits, then including that information is also important so your estate can stop payments. Your estate will be liable for reimbursing these institutions for payments that it should not have received. This applies to annuities and pensions as well.
Next, consider your physical assets. You can start here by including the titles to your home and car. Also include the title to any other personal or investment real estate, boat, RV, etc. If you own collectables, art, and/or jewelry, then pictures and appraisals are worth adding to the file
Following your physical assets, the file should include brokerage, retirement and bank account information. In addition to informing them of where your accounts are, you might also introduce them to the professionals you trust (e.g., financial advisor, CPA, attorney, and banker), or at least include their contact information. Cash and liquid investments are relatively straightforward, but illiquid assets can be tricky for heirs to understand without your guidance. Take this opportunity to educate them on businesses you own, investments in private businesses, hedge funds, and real estate partnerships. Include documents such as contracts and contact information in the file.
While assets get most of the attention, your debts and obligations are equally important. Your estate will be liable for your loans and the loans you have personally guaranteed, so it is important to make your heirs aware of them. Credit cards fall under this category, too. A divorce decree with ongoing obligations ought to be disclosed as well. Ignoring debt may lead to fines, foreclosure, repossession, or litigation.
As stated earlier, this list is not comprehensive. For example, you may wish to speak with your heirs about the philanthropic plans in your will. Once you have completed this file, present it to your heirs as soon as practical. As with back-to-school shopping, it is tempting to procrastinate, but you never know what tomorrow may hold. After the initial meeting, continue to meet periodically, especially if your estate plan changes.
By: Quinten Womack
Analyst/Trader
As Analyst/Trader, Quinten’s responsibilities include investment research, proforma implementation, and equity and fixed income trading.
By: Morgann Ellis, CFP®
Associate Advisor
Morgann augments our team of Client Service Managers in her role as Associate Adviser, working with those managers in serving clients as well as reviewing the work of the Junior Planner/Analysts.
