Take the Time to Meet With an Estate Planner

After putting this aspect of my finances off for the duration of my entire adult life, I finally found a recommendation for an attorney who focuses on estate planning, and we had our initial meeting earlier today.

A few months ago, I had some concerns that my tax accountant, who had done a good job helping me optimize how my business incorporation and taxes, might not have done the best job handling the tax consequences of the sale of my business assets. I sought a second opinion that confirmed my concerns. I recently filed amended tax returns for the year affected, and I feel much more confident that my taxes are now being handled properly. The new accounting firm offers many services, so I described my desire for help with estate planning. They gave me their sales pitch for their asset management division, but they also provided a recommendation for an estate planning attorney.

Having an estate plan was one of my goals for 2012, so although I’m a little behind, I’m glad this aspect of my financial planning is beginning to coalesce. Plus, it bothered me that I have been recommending others to visit an estate planner while I had yet to do so myself.

Related: Trust and Will Review – Affordable Online Estate Planning

Our initial consultation was earlier today. I provided the attorney the details of my financial situation and shared basic personal information about my life and goals. These were my goals going into the meeting:

• To make sure there would be no confusion about my wishes would be for my assets.
• To have a legally binding document in place that avoided the probate process.
• To ensure my philanthropic interests are considered, including possibly a foundation that will extend my pursuits.

She asked questions designed to give her the information she needs to draw up the legal documentation that will help me plan for my eventual demise — an event I hope is far in the future. Her advice was to consider this possibility: if I had died yesterday, what would I want to happen to my wealth (such as it is) today? And she offered additional points for me to consider beyond what I consider typical estate planning issues, like power of attorney and living will issues.

The issue of mortality always makes me somewhat uncomfortable. It’s been worse recently, as my mom is currently in the hospital on the other side of the country, and while she should be home within a week, it’s a reminder that health and life is something to be thankful for every day.

But the thought of there being disputes or confusion — or the chance that someone along the line, a relative or a state government, would mishandle or delay the process — means this is a necessary discussion. The discussion encompasses more than just the possibility of death, but on who will be able to handle decisions while I am in disabled and who can handle business for me if I am just unavailable.

One of the attorney’s suggestions is to create a revocable living trust. Almost all of my assets will be titled to the trust, the trust will be the beneficiary of my retirement accounts, and how the trust is designed will determine what happens to my assets when I eventually pass away. As of right now, federal estate taxes are only slightly a concern, but state estate taxes can be an issue. As we discussed though, the “tax tail shouldn’t wag the dog.” Minimizing tax consequences is always a great idea, but tax shouldn’t be an issue that defines whether an investment is good, whether to buy a house, or whether to make any financial situation.

Revocable trusts don’t do much to reduce estate taxes, but I have to assume I still have many years in front of me. I know that the plan I create today might differ from the plan I would make a year from now, as my life situation changes, and could be drastically different just a few years in the future, so the ability to make changes to the plan is important.

The attorney now has most of the information she needs to draw up the documents. I’ll be forming a trust and titling my assets under that trust. I’ll have a living will that will indicate what should happen should I be incapacitated, as well as a power of attorney document that will define who can handle certain matters for me. In a few weeks, I’ll meet the attorney again to review the documents.

My job isn’t done, though. Once the trust is established, my plan will be to change ownership of my bank accounts and investments so they fall within the trust, of which I will be the trustee. My cash funds are distributed among a number of banks, even though I’ve made some efforts to simplify my finances; I have about half the number of bank and investment accounts I had at the peak of my opening accounts for review on Consumerism Commentary, but I’m dealing with many more financial institutions than necessary. This doesn’t necessarily matter from a financial perspective, but if someone would need to access my cash, the volume of accounts would make maintenance more difficult for that person.

With my retirement accounts, my beneficiaries are all over the place, if they are defined at all. Again, once the trust is established, I will need to file paperwork with Vanguard, Fidelity, and TIAA-Cref, the companies holding my variety of retirement accounts, to assign the trust to be the beneficiary. The attorney mentioned a five-year distribution rule for inherited IRAs, something she would take into account when writing up the paperwork.

After arriving home from the meeting, I researched this five-year distribution rule for inherited IRAs, and I don’t like the idea of inherited IRAs needing to be fully distributed within five years, so I’ll have to ask the attorney more questions at the next meeting.

My particular attorney charges a flat fee for putting together all the legal documentation rather than charging by the hour. I can call with questions at any time without incurring any fees, though there are certain fees for making changes once the documentation has been prepared — and I expect I will make changes in time. The pricing model makes sense to me. Working with other lawyers — as well as other financial professionals who charge by the hour — I know how expensive this can get. And when it comes to professional services, I tend to be frugal-minded; something my accountants knew when they recommended this estate planning attorney to me in the first place.

I should have gone through the process years ago. I got lucky. I’m alive, and I still have an opportunity to take care of this. The hard part is deciding what to do with whatever is left of my assets after I expire, with the intent of being fair and reasonable, as well as leaving as much of a legacy as possible within the issues I am passionate about.

Even if you don’t have assets, it’s worthwhile to visit a trusted estate planning attorney. Having a living will and power of attorney can make life a lot easier for you down the road and prevent others from taking advantage of you when your wishes might not be able to be expressed in time.