Everybody knows what a “bucket list” is, right?
It’s a list (duh) of things you want to do before you die (i.e. when you “kick the bucket”). I won’t get into the weeds about the concept, so if you want to learn more about bucket lists and also ugly-cry through two boxes of Kleenex, watch the 2007 film The Bucket List with Morgan Freeman and Jack Nicholson.
But back to the blog.
Just as you and Morgan Freeman and Jack Nicholson have a bucket list for life, you should also have a bucket list for estate planning. Ask yourself: What do I need to do to arrange my affairs before I die?
Estate planning is about more than just legal documents. A good plan means accounting for your assets and providing the information, documents, and knowledge necessary to ensure a smooth transfer of those assets to the people you want to have them.
To help you create your own estate planning bucket list, here are 10 tips you can use to organize your estate before you die:
1. Get a Will or Trust.
Of course the first item on the bucket list is to create an actual estate plan. I’m an estate planning attorney writing on an estate planning blog. What did you expect?
Formal estate planning documents such as a Last Will and Testament or a Living Trust are crucial to make the administration of your estate as easy as possible. Without them, your estate could be tied up in messy probate — in some cases for years.
There are some notable differences between wills and trusts (spoiler alert: trusts can actually save money by avoiding probate), but the main goal is the same. Both documents express your wishes for the distribution of your assets after death.
Without a will or trust, the state says what happens to your “stuff.” For example, a nephew you hardly know could end up inheriting a big chunk of your estate simply because the law says so. You don’t get a choice in the matter.
Although there is a lot of “Do-It-Yourself” estate planning software or forms out there, I strongly encourage you to visit with an qualified, experienced estate planning attorney. For one thing, drafting or executing your estate planning documents incorrectly can have disastrous consequences. But more pointedly, an attorney can offer insight into potential problems, tax advantages, and other issues that you may not have considered.
2. Inventory your assets.
When you die, how will your representatives know where all your “stuff” is? They may know where you bank or what cars you have, but do they know what insurance policies you own? Whether you have prepaid for funeral plans? Who is the custodian of your IRA?
To help your representatives administer your estate, you should compile and regularly update an inventory of all your assets. Include a description of the assets, where it is located, where you keep the title (if any), and any other relevant information.
Be sure to include both tangible assets (e.g., cars, jewelry, furniture, personal effects) as well as intangible assets (e.g., insurance policies, patents, partnership interests). Remember, however, that this list will not actually convey the assets unless it is executed with the necessary formalities.
3. List regular bills and debts.
After your death, part of your representative’s job will be to pay your final expenses and debts. Failing to pay those debts in a timely manner can result in late fees, penalties, and even lawsuits — all of which result in less money for your loved ones.
To help your representative manage this aspect of administration, make a spreadsheet or list describing all your regular bills, debts, lines of credit, and any other expenses you have, as well as how to pay them. If you pay utilities online, for example, be sure to include your login codes and any other information necessary to pay.
You may also want to run a free credit report once a year just to make sure you have included everything. (It can also help you see if there are any erroneous “dings” to you credit score that you should contest.)
4. Review retirement Accounts.
IRAs, 401(k)s, and other retirement accounts generally allow you to name one or more beneficiaries to receive the account after your death. If the named beneficiary is living when you die, they can receive the account without needing to go through probate.
Sadly, however, some people forget to review and update their designations regularly. If your named beneficiary dies before you and you do not name a replacement beneficiary, that account will likely have to be probated.
You should also coordinate these beneficiary designations with the provisions of your Will or Trust, if any. Beneficiary designations override the provisions of a Will or Trust. In other words, if you have an IRA that lists your two kids — Jack and Jill — as beneficiaries, but then you create a Trust that says you don’t want Jill to have anything, guess what? When you die, Jill still gets half of the IRA.
Review your retirement accounts regularly to make sure the beneficiaries are alive and listed exactly as you want.
5. Update contractual beneficiaries.
Similarly, beneficiaries of insurance policies and annuities should be regularly reviewed and updated. If the named beneficiaries survive you, the contract provides that they receive the policy or annuity free from probate.
However, as with retirement accounts, if your named beneficiaries do not survive you or are otherwise unable to take the policy, most contracts provide that it pays out to your estate — meaning your probate estate.
6. Create a digital estate plan.
Who gets your Facebook account when you die? What happens to your Twitter? Your photos on Flickr or Instagram? Your e-mail account? Your Bitcoin? The Digital Age and the advent of Internet- and cloud-based assets have created a new category of estate planning for digital assets.
Your Internet accounts are your property, and, like your other property, you should provide instructions for its disposition after your death. This set of instructions is often referred to as a “digital estate plan.”
The gist of planning for digital assets is to leave information so your designated representative(s) can access your digital assets and dispose of or distribute them how you wish. For more information, see our guide on how to create a digital estate plan.
7. Select trusted representatives.
Remember that there are two main sides to estate planning: (1) What happens to your “stuff” when you die and (2) who takes care of your “self” when you become incapacitated.
First, let’s talk about your “stuff.” An executor (also known as a personal representative or administrator) or a trustee is someone appointed in a Will or Trust to manage and distribute your estate (your “stuff”) after your death. It is crucial to list someone you trust to fill this role.
What happens if you don’t list someone?
Well, you run the risk of your relatives battling over who should be in charge of the estate. By designating a clear order of appointment, you can head off those disputes and minimize the risk that your estate will be consumed by attorney’s fees and court costs.
Finally, what about your “self”? Every good estate plan should include documents naming representatives who can take care of you or make financial and/or medical decisions for you if you cannot. Consider using a durable power of attorney and an advance directive for healthcare to address some of these issues.
8. Visit a financial planner.
Even if you have a perfect estate plan in place, it won’t do much good if you don’t have any assets to pass on to your loved ones. For that reason, you should consider creating a full investment plan and/or insurance plan with a qualified financial advisor.
As you age, you may require long-term care insurance, or you may need to reduce the value of your estate to get under the estate tax exemption. Changing income tax laws and other financial rules and regulations may also warrant a restructuring of your assets.
9. Draft a letter of instruction.
An estate planning letter of instruction is meant to help guide your representatives through administering your estate. While there is no right or wrong way to write a letter of instruction, most people include what estate planning documents they have, where their assets are located, and what their representatives need to do next.
You should also consider listing subscriptions and memberships that need to be cancelled, passwords and other login information for online accounts that need to be managed or deleted (see the discussion on digital estate planning above), and family members and/or advisors who should be notified of your death.
10. Have an estate planning “fire drill.”
A letter of instruction is great, but writing is sometimes vague and things often get lost in translation. That is why you should also conduct an estate planning “fire drill.”
Just as fire drills in elementary school let you know what to do in the event of a fire, an estate planning “fire drill” is meant to let your family know what to do after your death. Pretend you have died and walk your family through the process of everything they must do to set your affairs in order.
This makes estate administration easier on your loved ones after your death, because even though they will be grieving, they at least know what to expect. These family meetings also provide a great opportunity for you to pass on your stories, values, and shared family culture.
Check these off your estate planning “bucket list.”
Regular bucket lists are generally just for fun. They are good for your soul, but no one is really hurt if you fail to check something off. But if you die without an estate plan (or without an organized estate), your loved ones will be left to clean up the mess.
Avoid that fate by creating your own estate planning bucket list and supplementing these tips with the advice of qualified legal counsel. To visit with an attorney about what else you should do to organize your estate, contact the experienced Oklahoma City estate planning attorneys at Postic & Bates for a free, no-obligation consultation appointment.
David M. Postic is an associate attorney at Postic & Bates, P.C. His practice includes estate planning, probate, real estate, adoption, business law, and litigation.
You can email David through our Contact Us page or by calling our office at (405) 691-5080.
[As with all our posts, the contents of this article do not constitute legal advice and are subject to our site-wide disclaimer.]