Clean Up Your Estate Plan; Update Your Schedule of Assets
Just like an actual estate, an estate plan needs ongoing maintenance. If you neglect it for too long, it can become overgrown by changes to your assets. Keep your estate plan nice and tidy by updating the document when you sell or buy assets.
PURPOSE
The purpose of your estate plan is to make your passing as easy and stress-free on your family as possible, while ensuring your final wishes are followed. Proper estate plans provide clear direction to your family about how you want your assets distributed. They can also minimize the impact on your family of estate taxes and other financial consequences
DON'T NEGLECT YOUR ESTATE PLAN
Unfortunately, many hire an attorney to draft their estate plan and then stick it in a filing cabinet, allowing the plan to remain unchanged for decades. If you are in this boat, your family will have a document that represents your assets as they stood 20 or 30 years ago. The estate plan may be filled with assets you no longer own and will not provide specific direction on the assets that you've since acquired.
If you haven't touched your estate plan in years, it's time to update not just the beneficiaries, but the assets listed in the plan as well. Those that don't update their estate plans are condemning their family to have to dig through pages of assets you no longer own and potentially argue over assets you've acquired that are not reflected directly in the estate plan.
Your lawyer may tell you that the pour over will takes care of this, but the will only addresses the legal status of the assets in your estate. The pour over will does not address the personal, emotional, and psychological impacts of who gets what when dividing up an estate.
UPDATE THE ASSETS
Each year you should pull out your estate plan and review the assets listed in it, cross out the ones that you no longer own, as well as hand write in the assets that you've accumulated or acquired over the course of the past year. Most estate attorneys include blank areas at the appropriate point in the estate plan for you to hand write in the assets you add to your estate.
UPDATE THE PLAN
If you have run out of room adding and deleting assets on this page, it's probably an indication that you should bring your estate plan back to your attorney to have them officially document the new assets. Most attorneys will provide this service free of charge as part of the overall estate plan management. If there is a charge, the cost will be minimal as they are not writing an entirely new estate plan but simply updating the schedule of assets.
CHECKLIST OF ASSETS TO REVIEW
To update your estate plan, go through the following checklist to see what assets should be removed or added from your schedule of assets. Review your plan, remove any assets you've disposed of, and add any new assets you've acquired.
FINANCIAL ACCOUNTS.
Identify any financial accounts that you have opened in the last year and add those accounts to the schedule of assets. You should include the account number along with the name, address, and phone number of the institution the account is with.
For accounts already listed in your estate plan, review each one to see if you have closed them. If you have completely closed any of the accounts, then you should remove them from your estate plan to avoid having heirs trying to find an account that no longer exists. Simply put a thin 'X' over the account with a note identifying the date (or approximate date) you closed the account.
If the account is still open, even if you have no money in it, you should leave it in the estate plan just in case you decide to start using the account again. Common accounts include:
- Checking accounts
- Savings, money market, and CDs
- Retirement accounts [including all IRAs and 401(k)s]
- 529 plans or other specialized savings
- Investment accounts
REAL ESTATE
As we move through life's stages, we regularly purchase and sell real estate. For most, this is because we outgrow the need for our current house. Starting a family, the birth of a second child, or improvements in income can each spur us to upgrade to larger and nicer homes. As we age and our children leave the nest to start their own families, we may also downsize to houses that are easier to manage.
Each of these purchases and sales should be reflected in the estate plan as they occur. Again, cross out the home you've sold along with a note reflecting the date of the sale. Make sure that any time you cross out an asset, you do it in a manner that allows for the information to still be readable. And add the purchase of the new home in the estate including the physical address and parcel number.
Investment property should also be recorded and properly documented in the estate plan. If you invest heavily in real estate, you may wish to separate the investment real estate by geography or categories, such as separately grouping single-family residences, multi-family residences, and retail properties.
It is also a good practice to keep copies of the recorded deeds in the estate plan. As you purchase a property, ask your real estate agent for a copy of the recorded deed and insert it in the back of the estate plan.
PERSONAL PROPERTY & OTHER ASSETS
You should also review personal property listed in your estate plan. If you were planning on giving your son the classic car you used to work on together, but you had to sell that car to help him with the down payment on a house, then remove the car from the estate plan. This will keep your son from feeling slighted because it looked like you 'forgot' you sold the car. This will also be an opportunity to see if you have any other personal property you'd like to give.
Jewelry, guns, art, furniture, or any other personal property listed on your estate plan should be reviewed to determine if you still own them. Again, if you sold them in the past year, cross out the item and make a note as to when you sold it.
Next, list off any high-value personal property you purchased in the last year. Again, cars, jewelry, art, furniture, and any other high-priced items should be listed. If you have an intended recipient for the property, state that in the plan when you add the item.
DO A QUICK BENEFICIARY CHECK
Finally, review your estate plan and the beneficiaries on your accounts to ensure that your will and other estate documents match how the accounts are titled and the account beneficiaries. Make sure to understand how beneficiary designations can impact your will. If your will and beneficiaries don't match, it will create conflict within your family upon your passing. If the conflicts and the amounts of money are large enough, they can lead to lawsuits.
Take the Purposeful Finance Challenge
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Joshua Escalante Troesh is a tenured professor of Business at El Camino College and the founder of Purposeful Finance. His career provides him with a unique insight on personal financial, having been a VP at a financial institution leading up to 2008, and involved with technology and internet stock research leading up to 2000. He can be reached for comment at info@purposefulfinance.org