The purpose of this series on legacy planning is to demystify it.
Common reasons why we put off legacy planning:
Busyness – Work, family, kids, etc. and the years float by
Kick the can – for many in their 20’s-40’s it’s easy to put off the planning, thinking there’s always time down the road. The problem is that none of us has the next day guaranteed
Cost – to hire an attorney for a full estate package: last will and testament, living will, and power of attorney documents for a couple, the cost ranges from $1,000 – $2,000
Information disadvantage – some avoid financial advisors or other professionals for this reason. Intimidated by the pro’s knowledge and worried about difficult questions or being taken advantage of
Morbid topic – After all, who thinks it’s fun to plan posthumously? Not the most appealing topic.
March 2020. The world shut down. Covid-19 ravaged and the future loomed uncertain. Huddled in our home, fearful of a severe virus, my thoughts turned to my kids. What would happen if Sarah and I passed? I quickly realized the Last Will and Testament completed 10 years prior with an infant daughter, was inadequate. We had an incomplete and outdated plan. Sarah lacked a will, so if she passed, things could get murky. If you’re married, your spouse needs a mirrored plan. Unless of course there’s a reason for differences, such as a remarriage with prior assets or other heirs involved.
Enter LegalZoom. I was a fan of their platform and process previously, so I returned. Their website prompts you to fill out your legal documents online, then mails them for you to sign with a notary. Their Estate Plan Bundle was $328 which included the 3 documents needed to form a complete estate plan – Last Will and Testament, Living Will and Durable Power of Attorney documents for a couple. Plus, one year of updates and reprints and one year of legal consultation with their contracted attorneys.
I completed the forms from the comfort of our home – key during a social lockdown.
Great online experience. About three hours to go through the forms. I read all the detailed information and carefully considered the document provisions.
Easy to navigate and simple questionnaires create the documents. Two of each, one for Sarah and I. All show 98% complete as we had not yet finalized the documents.
Before completing them, we needed a legal consultation to make sure our understanding was accurate. I found 30 minute sessions available the following week. I appreciated the ability to view the attorney’s profiles – legal specialty, education, and experience. With the consultation scheduled, my last step that day was to review the documents and jot down any specific questions.
Summary of the bundled docs:
Basic Power of Attorney:
Name an Agent to have financial capacity to act for you. Can limit agent rights, but generally you grant authority to transact retirement accounts, stocks, real estate and banking. You must decide whether the agent is granted these powers immediately or only when you are declared medically incapacitated.
Basis Last Will:
Indicate your estate heirs (primary and secondary beneficiaries). If you have children, name their guardian. A key concept here is that the Last Wills of a married couple will generally mirror each other. Inconsistency creates problems down the road. It’s important to consider your guardian and personal representative of your estate. Does it make sense to have same person raising your children also in charge of distributing funds according to your will? For us it does, but for others it might not.
Basic Living Will:
Purpose is to declare the extent you would like to be kept alive in the event of medical deterioration. Artificial life support? Organ donation, which ones and for what purposes? Who makes your medical decisions if you are unable to?
Results and takeaways from the legal consultation:
Having completed the digital questionnaire, reasoning through the scenarios, I felt comfortable enough to lead the conversation. A few key changes resulted from the legal consultation:
- Initially, I thought Sarah should gain Power of Attorney agent powers now. However, the attorney informed me they generally advise the powers become effective only if you are declared medically incapacitated. Additionally, you should have an alternate power of attorney if your primary is deceased or incapacitated. Joint accounts (bank, brokerage, etc.) eliminate the need for immediate power of attorney. And for accounts that are necessarily individual (retirement) you can establish specific power of attorney directly with those institutions today.
- She recommended we add an alternate agent to our Living Wills if we both become incapacitated simultaneously.
- When granting these abilities, it is very important that your agent and alternate agent know their role and responsibility. And they have information about what and where assets are located for quick action. In the Will you can itemize assets, but a schedule of assets should be provided to our alternate agent for more thorough detail.
- Testamentary Trust – With the Basic Last Will we provisioned a Testamentary Trust to payout out estate assets to our children in 3 installments. The testamentary trust triggers if Sarah pre-deceases me (same vice-versa) and our children are still minority age or if we did simultaneously. They receive 1/3 at age 18, 1/2 of remainder at 25, and the final installment at 30 – providing some control beyond the grave. I remember how unprepared to handle money I was at 18. Huge knowledge bomb – I was informed by the attorney that beneficiaries named on accounts (such as retirement) trump last will instructions. So, if we want the Testamentary Trust to be formed with those assets included (and the age-based distribution schedule to be followed) then I need to name my estate as the secondary beneficiary on these accounts instead of my children specifically.
- Medical Directive card – laminated card indicating a living will exists (with medical directive info) and the agent’s info. Thus, any healthcare provider should reach out to my agent for medical care wishes.
Make the updates. Schedule 2nd consultation with the attorney to review the updated documents. There is an option to grant access so the attorney can view the documents. Allows us one final pass to make sure our wishes are captured correctly. Order the docs printed on fade-resistant paper. We then bring two witnesses to any public notary service. Then file them away physically and digitally (cloud-based) and send copies to alternate agents and guardians.
- This is a rip-off-the-band-aid action – if you continue to procrastinate, it will never get done
- Going through the forms yourself allows you to better understand this powerful paperwork and forces you to think through your wishes