What is Estate Planning?

Each summer my wife, our son, and I travel to Highlands, North Carolina, for a long weekend. While we’re there, we stop by the little grocery store on the edge of town and stock up on sodas and homemade cookies. With our provisions in a backpack, we head to the trailhead and take the short, steep hike up Whiteside Mountain. On a clear day, the view to the valley below is incredible—lush trees, houses large and small, every year a little more development, but still unspoiled.

As part of our ritual, we take lots of pictures and then I hoist our son on my shoulders (not quite as easy now as it used to be!) and we hike back down into town for ice cream and pizza.

Whenever I think of Whiteside Mountain, I think of the view from the top, looking down, serene, at peace.

When beginning your estate planning, you’re standing on a mountaintop of life experiences, looking down at the valley below, which represents your goals and dreams about what you’d like to have happen when you’re gone. So here you are, with a vision of what you’d like to accomplish, some of it a little murky. But how do you get there from here?

Whether you’ve been through the estate planning process before or this is your first time, whether you’re neat as a pin or searching beneath the cushions for a pen, the estate planning process is pretty much the same—an orderly path you take to achieve what you want.

But before I describe the path you’ll take, let’s look at what estate planning is.

What Is Estate Planning?

Put simply, estate planning is the process of communicating your wishes about your care and property—real estate, cash, treasured possessions, the stuff in the bottom of your closet—in a manner in which they’ll be respected should you be unable to speak for yourself. At the end of your planning (yes, there is an end in sight!), you’ll have a folder stuffed full of signed documents—typically, a will or trust, powers of attorney, and a living will or advance directive—all designed to bring about what you want to accomplish. I’ll talk in later chapters about what these documents are and the place they may have in your planning.

To be effective, your estate planning must be:

Informed. You need enough information to make intelligent decisions—to know why certain techniques are better for you than others, and the pros and cons of these techniques.

Coordinated. The documents you sign in your lawyer’s office aren’t the only ones that affect your estate planning. A host of other documents, such as beneficiary designations on life insurance and retirement plans, joint accounts, and real estate deeds are also very important. You’ll need to be aware of how these other documents affect your planning and make sure they are consistent with your overall plan.

Concluded. Let’s face it, most folks would rather do just about anything other than plan for their mortality. There’s a real tendency to put off planning as long as possible—so congratulations on beginning the process. Try not to get bogged down somewhere along the way, because failing to complete your estate planning doesn’t leave you a whole lot farther along than if you never took it up in the first place— you just have less money after paying for something you can’t use.

Your Path to Successful Estate Planning

Let’s look at the path you’ll take to get to an effective estate plan as part of a blended family. There are four primary steps along the way: Prepare, Discover, Meet, and Finalize.

Step 1. Prepare

Preparing for the process includes identifying your goals and concerns, assembling the necessary information, and talking about the issues with your spouse.

Identify your goals and concerns. Identifying your goals and concerns will guide your estate planning choices. For example, your primary goal could be to provide for your children at your death, or it could be to provide for a surviving spouse. You might be concerned about giving your children too much too soon or about your assets winding up in the hands of a former spouse. Moving from the general to the specific— from the vague (provide for loved ones) to the concrete (provide for Bob, Cindy, and Tonya, but not your ex)—lets you make choices that will ultimately achieve what you wish to accomplish. You’ll also want to review your goals and concerns from time to time to remind yourselves why you are going through the process and encourage you to stay on track.

Assemble the necessary information. Beginning your estate planning is like tackling a home repair project or a recipe: you want to make sure you have all of the materials and ingredients at hand to ensure an orderly process. Preparation can help save you time and frustration spent looking for misplaced items, and can save you expensive attorney’s time as well.

If you do a lot of cooking, you may have come across a wonderful French expression, mise en place, which is loosely translated as “everything in its place.” When you’re starting a recipe, it’s helpful to get all of your ingredients, pans, and gadgets together up front so you’re not hunting for the coriander just as the sauce is beginning to burn. Similarly, with your estate planning, it’s a whole lot easier if you’ll take the time to collect the information you’ll need at the beginning, rather than arriving at the lawyer’s office without a deed or an agreement or a retirement plan statement that you need. (Chapter 12 has a list of what to gather.)

Talk about the issues. After the both of you get a good handle on your goals and concerns and your financial picture, you and your spouse will want to sit down together and talk. You may find a lot of common ground; you may find some of your goals will differ. One spouse may wish to see family assets pass exclusively to that spouse’s children; another spouse may say, “let’s just throw everything all into one big pot and divide it among the kids.” I’ll give you suggestions on how to address and reconcile these issues.

Step 2. Discover the Tools and Techniques Available to You

Once you’ve discussed your goals and concerns, you’ll want to think further about how you may wish to provide for the children in your blended family. Also, you’ll want to learn more about taxes and the tools that you’ll use in your planning. I’ll describe basic estate planning devices such as wills and revocable living trusts and introduce you to more specialized techniques used in blended family estate planning. I’ll also point out techniques that work well if you and your spouse have ever lived in a community property state.

Step 3. Work with Your Lawyer and Other Advisers

Once you and your spouse have decided on a general course of action, you’ll want to select the lawyer who’s right for you. You’ll meet with the lawyer to go over your goals, concerns, and financial information. Your lawyer will have recommendations to help you achieve your goals. You also will want to make your accountant, if you have one, part of the team since he or she has an intimate knowledge of your finances, as well as any financial adviser you regularly consult. (Chapter 12 offers tips about how to select and work with attorneys and other experts, as well as what to look for when you review the documents produced by your attorney.)

Many of my married estate planning clients come to me as a couple. Some prefer to work on their own. Either way, one person generally takes the lead and is the contact person for questions, information, and scheduling meetings. If you are the leader, your responsibilities are to:

• work through the book
• keep your spouse informed throughout, and
• set aside time for you and spouse to work on exercises together.

Step 4. Finalize Your Plan

Once you’ve met with your lawyer, you will want to carefully review any documents your lawyer prepares, reading them closely to make sure your wishes are being respected. Don’t be afraid to ask questions!

After you’ve given any changes to your lawyer and received answers to all of your questions, your lawyer will finalize the documents and invite you to the office to sign them. The signing ceremony will be very formal, with witnesses and a notary present to make sure all of the state law requirements are followed.

Once your estate planning documents have been signed, you should take time to rest and celebrate your accomplishment. Over time, you’ll want to continue to make sure that your joint checking accounts, life insurance beneficiaries, retirement plan beneficiaries, and property titles are set up in ways that are consistent with the new plan and that you make any transfers (into a trust, for example) recommended by your attorney. Should you have a significant life event (birth or adoption of a child, change in marital or financial status), you’ll want to look at your plan to make sure that it is still current and reflects your desires. Even if you don’t think there have been any big changes to your life, you should review your plan about every three to five years.

Keeping It All Together

This book contains some exercises and worksheets that you and your spouse will want to complete when designing your estate plan. You also will collect financial information that your lawyer will need. Without a system in place, it may be tough keeping everything together.

You may want to purchase a three-ring binder, some pockets that will fit into it, and a three-hole punch so you can corral the information in a central place. It’s a good place for you to keep notes and a running list of questions to ask your lawyer, your accountant, and your financial adviser.