Leaving Your Legacy: Establishing a Plan to Care For Those You Leave Behind

Consumer Advocate Offers Advice on Putting Your Final Financial Affairs in Order

As Americans gather for the Thanksgiving holiday, many thoughts will turn to loved ones both past and present. According to Certified Financial Planner Board of Standards, Inc. (“CFP Board”) Consumer Advocate, Eleanor Blayney, CFP®, Thanksgiving’s focus on those we care about creates the ideal setting to reflect on the legacy we will leave to our family and friends. To ensure those reflections turn into reality, Blayney suggests all Americans take time this month to create their own estate plan.

“Many people wrongly assume that estate planning is only for the wealthy, or those with significant assets they want to protect from probate fees or taxes,” says Blayney. “The reality, however, is that everyone needs a plan for the management and disposition of assets, the care of dependent children and relatives, and the management of health care and our physical comfort when either death or disability silences us.”

Estate planning is one of 12 steps in CFP Board’s year-long “12 for ’12 Approach to Financial Confidence. Blayney suggests that consumers consider these four tips when creating their estate plans.

1. Take inventory of what you have and determine its value. Any and all items that you can make decisions about should be accounted for. This includes financial assets, real property, intangible property such as a patent or copyright, even computer files and passwords. Then determine the financial value of each asset, as well as any debts you owe. Review how each asset is titled, and/or if there is a beneficiary designation associated with the asset. Be aware that any account or title that is in joint name or carries a beneficiary designation (i.e. retirement plan, life insurance policy, annuity or pension) already carries its own “transfer instructions” as to who will receive the asset after you. Anything else requires the more specific instructions contained in a will and/or trust document.


2. Consider whom you would like your assets to go to, if not already decided by title or beneficiary designation. As importantly, determine if your beneficiaries or heirs are ready – by age or maturity – to receive such assets. Are they too young to own property or assets in their own names? Are they incapable of managing these assets responsibly? Is the asset illiquid (such as a residence with a mortgage, or an ownership share in a closely held-business)? Would the inheritor of the illiquid asset have a difficult time coming up with the additional funding that might be needed to hold such an asset? A “yes” response to any of these questions means that more elaborate strategies than a simple transfer may be warranted.


3. Decide whom you do NOT wish your assets to go to. While the majority of people want to benefit a relative, there is virtually no one who wants this relative to be their Uncle Sam, or any of his extended family in the guise of state or local government. Furthermore, few married individuals are okay with the prospect of their assets going to the “next” wife or husband, should they die before their own spouses. And it’s not likely that a bequestor wants his or her wealth to be consumed in paying off a family member’s creditors. If any of these “yes, but” situations are applicable to your wishes about how your assets will be distributed, be sure to take note. These, too, will need to be addressed by more sophisticated estate planning.


4. Use life and disability insurance to create an estate if you have nothing to bequest but have individuals dependent on your support. You will need to get life and disability insurance coverage to make sure your dependents will not be left without resources, should you die or become unable to earn a living. Preliminary to getting such coverage, assemble your medical records and information, along with all the data on your assets.

To tie all the different parts of your estate together into a plan that represents your wishes, Blayney advises consulting with a CERTIFIED FINANCIAL PLANNER™ professional. “A CFP® professional is uniquely qualified in helping create an estate plan, given his or her comprehensive focus on all aspects of your life (e.g. your family circumstances, your personal goals and preferences, your financial resources) as well as the federal and state laws that govern the income and estate tax consequences of asset transfer,” says Blayney. “He or she will know what tools, such as wills, trusts, powers of attorney, additional beneficiary designations, or more complicated transfer strategies, your plan will need. Additionally, a CFP® professional can communicate your special needs to a qualified attorney and help you periodically review your estate plan.”

12 for ’12 APPROACH TO FINANCIAL CONFIDENCE

In January, CFP Board launched a new initiative called “12 for ’12 Approach to Financial Confidence” where all the components and steps for successful personal financial management are presented, one each month throughout the year including: establishing realistic goals, tax planning, emergency and risk management, investing, retirement, debt management, and estate planning.