Estate Planning: Why signed legal documents are not enough.
The Challenge
Often when a loved one becomes incapacitated or dies, there are two tragedies. The first one is obvious. The second one isn’t: it’s incomplete estate planning.
Many tragedies in estate planning stem from one hard truth: a set of signed legal documents is NOT a complete estate plan. There is more to an estate plan than a will and/or trust, health care directives, and powers of attorney.
Equating the legal documents with a complete plan can contribute to a host of problems for estate administrators. Estate administrators are the friends and family members who will manage your affairs in case of your incapacity or death: your executors, trustees, and/or attorneys in fact (the technical name for people who hold powers of attorney).
In what sense are the legal documents not a complete estate plan? The legal documents set the boundaries of the plan, what is required and what is prohibited, and provide some guidance on a few essential tasks. But the documents offer only a small fraction of the guidance that estate administrators need to effectively manage your affairs and carry out your wishes. Your estate administrators need to know what to do and how to do it, in light of your life routines, concerns, personal and financial preferences, family dynamics, and a host of other issues. Legal documents alone are inadequate for addressing these critical issues of proactive and comprehensive estate planning.
Estate planning lawyers will not fix this. Sadly, but understandably, lawyers will insist that the legal documents are “the plan” and will not draft additional guidance. Why? They fear that additional lawyer-drafted guidance will be construed as legally enforceable, widening the scope of estate planning and making it more complex.
But the situation still needs to be fixed. Lawyer concerns about complexity do not trump the need for efficient management of your affairs. Leaving your estate administrators to fumble around in the dark with insufficient guidance isn’t fair to them or to your estate plan. Keep in mind that estate administrators typically have no legal or estate planning background.
Lacking essential guidance, estate administrators may experience high levels of stress and frustration and feel inadequate and overwhelmed. Procrastination in fulfilling such difficult and time-consuming responsibilities is common. Many administrators regret that they ever agreed to accept such a burdensome role.
The Solution
The good news is that this situation is entirely preventable. Below we outline a straightforward and effective solution:
- A Certified Financial Planner® (CFP) professional with training and experience in estate planning can and will provide that missing guidance. In both Canada and the United States, financial planners lawfully provide estate planning services; they just cannot draft the legal documents required to implement the plan (that would be deemed “practicing law without a license”).
- The missing guidance is not given by the client’s estate planning lawyer and is not within the scope of the legal documents traditionally associated with an estate plan (Wills, Trust, Power of Attorney documents, etc). Therefore, this guidance does not add to the legal documents in the plan or increase its complexity, nor is it advice from your attorney that makes them legally accountable.
- The CFP has an ongoing relationship with the client and has a holistic understanding of the client’s broad life situation. The CFP is trained to understand how actions in one area of a client’s financial life may affect other areas. Therefore, the CFP is ideally positioned to provide estate planning guidance that is truly tailored to the client and their specific needs, wishes, and goals. Cardinal Point Certified Financial Planner® professionals (CFPs) have decades of experience in estate planning and helping clients effectively and efficiently manage after the incapacity or death of a loved one. Our CFPs are exceptionally qualified to provide estate planning guidance not covered by the legal documents.
What exactly is this guidance? The guidance is detailed, step-by-step descriptions of what to do and how to properly do it to best manage your affairs in the event that you become incapacitated or upon your death.
This includes:
- Detailed, comprehensive task lists for incapacity or death, and
- Statements of your intent regarding such things as funeral or memorial service arrangements, pet care, online accounts/assets and other planning and strategizing that is typically not included in legal documents drawn up by your attorneys.
Detailed Task Lists Unfortunately, one cannot simply assign the drafting of task lists to a financial planner. Your task lists are unique and require in-depth knowledge and insight that only you have. You need to drive the development of these lists, with the financial planner serving as a sounding board and advisor. Consider this approach:
- Develop two task lists: one for death and one for incapacity.
- For each task, write enough to capture the essence of the task (e.g., feed the cat, water the plants, pay bills, cancel my subscription, call my work supervisor, etc.). Be comprehensive. Don’t leave any part of your life unaddressed. But at this point you don’t have to provide all the details, just an overview of tasks to be done.
- In a separate work session, go back and flesh out the details of each task including procedures and steps, due dates, phone numbers and addresses, account information, contact persons if the administrator runs into problems, etc. Include tips for completing the task. Remember: the estate administrators do not know how you normally do these tasks, so give them that information.
- Consult and confer with your spouse, your Cardinal Point financial planner, and the person who would usually perform the task. Are the instructions clear? What steps are missing? What other guidance would help the administrator handle these responsibilities?
Cardinal Point has a template of more than 100 of the most common tasks to be completed in the first twelve months following a spouse’s death, so we know that developing these lists is a marathon. But it is worth your time. Look at it this way: volunteering to serve as your executor, trustee, attorney-in-fact, etc. is an act of love. Love them back by making their work as understandable and easy as possible.
Statement of Last Wishes
There is a compelling reason to avoid putting your personal wishes in a Last Will document: if your estate goes through the probate process, that document becomes a public record, and you may want to keep that information private and confidential.
Instead, craft a separate Statement of Last Wishes (a document that remains private, though not legally enforceable). Describe your vision for your funeral or memorial service and celebration of your life. Provide details that won’t leave your loved ones confused or guessing what you would have wanted. Also add instructions regarding things that should be done that are not in your Will. For example, you may add letters to be distributed to your loved ones.
Statement about Pets
Create a separate document about pet care. In addition to care and feeding, consider providing guidance about medication, play routines, favorite toys, playmates, preferred veterinarian, and your vision about what should happen upon their death.
Statement about Your Digital Life
Some of our most valuable and intimate personal information can be found in our online accounts, profiles, and online forums. Your Cardinal Point financial planner can help you draft a confidential Statement that preserves important digital artifacts, protects your digital identity, and provides for the efficient disposition and closure of online accounts.
Team Coordination
There is enormous value in proactively addressing the complexity of your estate plan with your loved ones in family meetings while you are still alive and well.
- Consider hosting a family meeting every few years to go over the plan at a high level: the general steps that will be followed and, in the event of death, how your assets will be dispersed. Use these meetings to clarify your wishes and answer any questions your loved ones may have.
- Regularly meet with your estate administrators. Confirm that they understand their roles and are prepared to execute their responsibilities.
- Invite your Cardinal Point financial planner to arrange and manage the family meetings for you.
Don’t Procrastinate
These documents are invaluable for managing your affairs in case of incapacity or death even if you don’t have a set of legal estate planning documents. But you need to take the initiative. Why not get started today? Will you need these documents tomorrow? No one can predict the future. Talk with your financial planner: clear written communication of your needs and wishes, and what needs to be done and how to do it, will put you on the path to a smooth and effective estate planning strategy.