Updated: Jun 5
Estate planning is a critical aspect of the financial planning process. Reviewing a client’s documents is an important exercise, both at the outset and throughout the relationship. However, this can be a daunting task for both clients and advisors, who may find the exercise tedious and, perhaps, confusing.
To help guide our document review, we have created this checklist. It covers key considerations regarding the most common estate planning documents, including:
Powers of Attorney
To pair with this resource, or to guide a more general discussion with clients, please see our “What Issues Should I Consider Before I Update My Estate Plan?” checklist.
Welcome back to Gateway Financial! Today, we want to discuss an essential aspect of financial planning that often gets overlooked—estate planning. Creating and maintaining an effective estate plan is crucial for securing your financial future and protecting your loved ones. However, we understand that navigating this process can be overwhelming. That's why we're here to provide you with a comprehensive estate planning checklist that covers key areas to review. By following this checklist, you can ensure that your estate plan is up to date and aligned with your wishes.
Reviewing Threshold Issues:
Before delving into the specifics of your estate plan, it's important to address a few threshold issues. Have you recently changed residency? Confirm that you have established your domicile, your legal home, in the new state and that your estate plan complies with the applicable laws. Additionally, ensure that the location of your original documents is known to your family or fiduciaries and stored in a safe yet accessible place.
General Powers of Attorney: Examine your general power of attorney (POA) and determine whether it's immediate or springing (contingent upon a specific factor like incapacity). Clarify whether your POA is durable and continues beyond your incapacity. Review the appointed agents named in your POA, considering their qualifications and the potential complexities that may arise if multiple agents must act jointly. It's essential to select agents who understand the respective areas of finance and healthcare, as they may differ.
Healthcare Powers of Attorney: When reviewing your healthcare powers of attorney, give careful thought to the appointed agents. Considering the nature of their role, having local or readily available agents is advisable. If you have named multiple agents, clearly express your wishes to avoid potential inefficiencies and disputes among co-agents. Don't forget to have contingents or successor agents in place as backup options. It's also crucial to review your healthcare POA to ensure it aligns with your HIPAA authorizations and clearly expresses your end-of-life treatment preferences.
Last Will and Testament:
Review your executor or personal representative appointments and successors in your last will and testament. Confirm that they are qualified to serve under the state law and capable of fulfilling their duties. If you have minor children, include trust provisions to control the timing and access to funds for their proper support and protection. When naming a married couple as guardians, consider the potential impact of divorce or the death of one party on their suitability.
Revocable Living Trusts:
If you have a revocable living trust, review your trustee or co-trustee appointments and ensure they meet the qualifications under state law. Evaluate the costs and benefits of appointing a corporate fiduciary, but remember that excessive costs may arise if a capable individual isn't available. Determine whether your trust includes beneficiaries with special needs and review the allocation of the estate or inheritance tax burden. Consider whether your will pours over into your trust and decide whether it's necessary to fund your trust during your lifetime.
If you have an Irrevocable Life Insurance Trust (ILIT), ensure that the trustee is properly administering the trust, paying premiums on time, and issuing Crummy notices if applicable. For other types of irrevocable trusts such as charitable remainder trusts (CRTs) or charitable lead trusts, confirm that they are properly administered, and annual payments are calculated and made correctly. Review any Grantor Retained Annuity Trusts (GRATs) or Spousal Lifetime Access Trusts (SLATs) to prevent inclusion in your taxable estate. Finally, ensure your actions align with the terms of your trust and file income tax returns appropriately.
When reviewing estate planning, there are several miscellaneous considerations to keep in mind. It is crucial to ensure that your estate plan aligns with any premarital agreements you may have to avoid conflicts. Reviewing non-probate transfers, such as transfer on death or payable on death designations, is important to ensure they are in line with your overall plan. Regularly reviewing deeds, account titling, and beneficiary designations for various assets, such as retirement accounts, life insurance policies, and annuities, is necessary to confirm accuracy and alignment with your wishes. Additionally, it is advisable to create flexibility in your plan by designating a trust protector who can make changes if unforeseen circumstances arise. Considering the potential for future will or trust contests is also important to safeguard the integrity of your estate plan. By addressing these miscellaneous considerations, you can ensure the effectiveness and smooth administration of your estate plan.
In conclusion, estate planning is a crucial aspect of the financial planning process, and reviewing a client's documents is essential both at the beginning and throughout the advisory relationship. However, this task can be daunting and confusing for both clients and advisors. Thankfully, with the advancements in technology, working with clients on estate plans has become more accessible, and utilizing questionnaires and checklists can ensure a comprehensive and effective estate plan.
This flowchart checklist covers various major areas of estate planning, including wills, living trusts, revocable trusts, power of attorney, and living wills. It emphasizes the importance of addressing threshold issues, such as residency changes and the applicable laws that may affect the estate plan. Additionally, it highlights the significance of appointing and reviewing agents who understand the specific areas of responsibility, such as financial matters or healthcare decisions.
The checklist also emphasizes the need to clearly express wishes regarding healthcare options and end-of-life treatment, as well as the importance of considering minor children and including trust provisions to protect and support them. It covers important considerations for wills, such as appointing suitable executors or personal representatives and considering the impact of divorce or death on appointed guardians. The checklist also addresses the importance of properly administering irrevocable trusts and ensuring compliance with trust terms and formalities.
Furthermore, the checklist touches on various miscellaneous aspects, including premarital agreements, non-probate transfers, retirement accounts, beneficiary designations, and the role of a trust protector. It underscores the significance of administering the estate plan effectively and considering the possibility of future changes or contests.
Overall, the checklist serves as a valuable tool to guide clients and advisors through the intricate process of estate planning. It reinforces the importance of seeking professional guidance and working with knowledgeable advisors who can ensure the proper setup and administration of an estate plan. By following this checklist and regularly reviewing and updating the estate plan, individuals can provide clarity, protection, and peace of mind for themselves and their loved ones.